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The stars are aligned for a solid year for industrial conglomerate Larsen and Toubro Ltd (L&T) said institutional brokerage firm CLSA, giving a bullish stance on the stock.

CLSA in its research report recommended a ‘buy’ on the Larsen and Toubro stock with a target price of Rs 2,570, indicating an upside of 22 percent from its Tuesday’s closing price of Rs 2,106.45.

The brokerage firm said that improving orders and robust E&C (engineering and construction) execution are key positives for the L&T stock going ahead.

The company is also expected to witness expansion in profit margins in the coming quarters as materials costs fall, which can augur well for the share price.

Besides that, the brokerage firm pointed out that the twin themes of turning around loss-making businesses and reallocating capital to improve return on equity (ROE) still have steam and are key catalysts for L&T’s consolidated EPS (earnings per share) to double by the financial year 2025.

L&T has been in the news recently for several transactions involving the sale of its non-core assets.

In December, the company signed a share purchase agreement with the Canadian Pension Plan Investment Board to transfer their entire shareholding in L&T Infrastructure Development Projects Ltd. (L&T IDPL), along with their subsidiaries to Epic Concesiones Pvt. Ltd., a special purpose vehicle (SPV) created for this transaction.

The deal was done for an enterprise value of Rs 6,000 crore and an equity consideration of Rs 2,723.4 crore.

Jefferies, in its earlier research report, said that it believed that a buoyant equity market was helping L&T with its monetisation drive as the management always looks to sell the asset at a reasonable valuation. It, too, maintained its ‘buy’ rating on the stock with a price target of Rs 2,455.

Macquarie also said earlier that the divestment of non-core assets would be key to improving the company’s overall returns. It also has an ‘outperform’ rating on the stock with a price target of Rs 2,240.

Shares of L&T are trading at Rs 2,111.25, up 0.22 percent.

(Edited by : Rukmani Krishna)

First Published:Jan 11, 2023 1:41 PM IST