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Kolkata: US-based MNC brokerage firm Goldman Sachs revised the target price of L&T shares sharply upwards from Rs 3,730 to Rs 5,000. It was earlier neutral on this stock and has now assigned a Buy rating. The impact was visible on Friday. Following the upgrade, at 1 pm on Friday, Dec 12, Larsen and Toubro stocks were trading at Rs 4,092.70, up Rs 88.80 or 2.22%. At one point in the morning, the shares surged 3% and was leading gainer in the Nifty 50 pack.
Goldman Sachs flagged the strengths of the infrastructure giant and its new view reflects L&T’s strengthening growth visibility and an attractive risk-reward profile. The growing heft of the company was apparent from the improving finances of the company and its growing skill pool and fast expanding capabilities.
For any infrastructure company handling massive and complex constructions, strength in project execution and efficiency in operations are two extremely important parameters. Goldman Sachs observed in its note that L&T pushing ahead in both execution strength and operational efficiency, which is leading to new opportunities. And all these could lead to a re-rating.
Goldman Sachs also mentioned another dimension to shed positive light on the company. And that is the recovery in capex that is being discussed in many quarters. The research note of the brokerage major expressed confidence in a domestic capex recovery. This, in turn, could lead to an improved order visibility across near-, medium- and long-term horizons, it said. As a result, Goldman Sachs expects L&T revenue to grow at a compounded annual rate of low double digits. The PAT could grow even higher and reach mid teens, mentioned the brokerage.
Goldman Sachs is also bullish over the company’s robust order book and simultaneously low working-capital requirements. Capital allocation is also improving and these could be the main drivers of projected earnings growth in the period between FY26 and FY28. It also said that profit margins could be boosted during the period FY28 and FY30. Growth in new strategic areas such as defence, green hydrogen and nuclear power could lead to this realisation. Goldman Sachs also forecast that these segments can contribute as much as 15% of the orders flowing in by FY35. These cumulatively contribute about 4% now.
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