L&T shares hit a 52-week high as it secures new orders

Larsen & Toubro (L&T) shares have hit a 52-week high of Rs 1,390, up by 3% on the BSE on 14th January, 2021. The market is otherwise quite downcast, riding on the steady line of order inflows in the constructions and engineering major.

L&T announced on 14th January that its construction division has secured important and large orders from prestigious clients for several businesses. The commercial and residential spaces arm of the buildings business has received an order from a noteworthy developer to construct an office space in Mumbai.

On 13th January, the construction division secured orders from important clients for Metallurgical & Material Handing Business and Power Transmission & Distribution Business.

On the other hand, the railways strategic business unit has won an engineering, procurement and construction (EPC) order from the Central Organization for Railway Electrification (CORE), package EPC-06 to electrify 918.40 RKM/1171.31 Track KM of railway lines in the North Western Railway.

The size of the orders was not revealed by L&T, instead they stated that the significant orders range from Rs 1,000 crore to Rs 2,500 crore. Considering these new orders, L&T has announced EPC order wins valued at more than Rs 70,000 crore as on date since October. The lowest bidder in orders is worth approximately around Rs 8,800 crore.

ICICI Securities, said in a note, “During October-December quarter (Q3FY21), L&T announced EPC orders are estimated to be more than Rs 59,000 crore, across high speed rail, construction, water effluent, hydrocarbon, transportation, mining equipment, power T&D, heavy civil infrastructure and defense segment indicating robust order inflows for the quarter. Also, the order pipeline remains robust across T&D, green energy corridor, railways, transportation, water & infrastructure, etc. Key risks remain project delays/deferrals and less-than-expected conversion of the tendering pipeline.

At the same time, brokerage predicts that Q3FY21 will be a reasonable quarter for the capital goods domain in reference to ordering inflows while execution may improve as a result. Execution picks up with laborers almost returning to sites, touching 95% of pre-COVID-19 levels during the quarter as economic activities normalize.

It said, “In our view L&T’s working capital and cash flow situation will be key monitorable. Consequently, we expect adjusted standalone revenue to grow marginally by 0.5% to Rs 19,985 crore. EBITDA (earnings before interest, taxes, depreciation and amortization) is expected to grow by 9.9% to Rs 1608.8 crore with margins expected to improve 30 basis points (bps) to 0.8% for the quarter.”

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