'Buy' L&T Shares Maintains Motilal Oswal, Sees 12% Upside — Here's Why

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Motilal Oswal Report

Larsen and Toubro Ltd. is optimistic about the Middle East region and expects ordering to grow in the midteens over the next five years from this region. Sector diversification and country diversification within the Middle East help L&T tide over the volatility in oil prices.

With private and government capex ramping up in select areas, L&T overall hopes to maintain mid-teen growth in order inflows in the medium to long term.

Management remains focused on its capital allocation strategy and expects to hive off non-core assets soon and keep investing in new-age areas over the next five years.

We maintain our estimates and Buy rating on L&T with an SoTP-based target price of Rs 4,500, based on 28 times two-year forward earnings.

Key risks and concerns

A slowdown in order inflows, geopolitical issues, delays in the completion of mega and ultra-mega projects, a sharp rise in commodity prices, an increase in working capital, and increased competition are a few downside risks to our estimates.

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