L&T shares gain as board to consider share buyback, dividend. Sentimentally positive, says PL

Shares of Larsen & Toubro Ltd (L&T) on Friday jumped 3 per cent in an otherwise weak day for the stock market, as the engineering and construction major said its board would consider a share buyback proposal, along with special dividend when it meets on July 25. Prabhudas Lilladher (PL) said while it is awaiting details of the share buyback premium over current market price, the news is sentimentally positive for the stock.

The stock also gained as the company bagged a mega order from National High-Speed Rail Corporation Limited (NHSRCL) for construction of  the 135.45 km stretch at Mumbai Ahmedabad High-Speed Rail Project. L&T defines mega project as one with revenue scope in excess of Rs 7,000 crore.

The stock rose 3.34 per cent to hit a high of Rs 2, 572.80 on BSE. To recall, the L&T board had in August 2018 approved its first buyback in 80 years of the company’s history, for up to 4.29 per cent of its paid-up equity capital, aggregating to a value of about Rs 9,000 crore. The proposal was turned down by the market regulator Sebi, citing compliance issues over its post-buyback debt-equity ratio.

PL said L&T is well-placed to benefit in long run with strong tender prospects, better order conversion in the domestic market, significant traction in hydrocarbon segment from exports market and expected uptick in private capex.

"The stock is currently trading at PE of 28.1 times/23.9 times FY24/25. We have 'Buy' rating on stock with a target of Rs 2,615," it said.

L&T said it would also consider a special dividend on equity shares for FY24. If approved, the record date for the purpose of determining the entitlement of the equity shareholders for the said dividend would be Wednesday, August 2, the company said in a stock exchange filing.

For the June quarter, HDFC Institutional Equities is expecting L&T to report a 23.8 per cent year-on-year (YoY) rise in consolidated net profit at Rs 2,110 crore. It sees net sales rising 12.8 per cent to Rs 40,440 crore. It sees Ebitda at Rs 4,570 crore, up 15.5 per cent. Ebitda margin is seen at 11.3 per cent, down 41.5 basis points sequentially but up 26.3 basis points YoY. 

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