Discussing Larsen and Toubro fundamental analysis holds significant relevance today, particularly in light of India’s monumental achievement with the successful landing of Chandrayaan-3 near the lunar south pole on August 23, 2023. As we know, India is a rapidly emerging nation with a swiftly growing economy. The demand for the infrastructure sector has witnessed a generous surge in recent years, aligning seamlessly with this upward trajectory. This momentous event seems to have had a notable impact on Larsen and Toubro’s stock performance, with its share price surging from ₹2689 on August 23, 2023, to ₹3009 by September 12. The big jump of about 12% shows significant growth. Thus it becomes crucial to carefully examine Larsen and Toubro fundamental analysis given the current circumstances.
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About the Company- Larsen & Toubro Fundamental Analysis
Larsen & Toubro, a distinguished Indian multinational, commands a formidable presence in EPC Projects, Hi-Tech Manufacturing, and Services, with a staggering valuation of ₹4,11,327 Crores. They work in over 50 countries all around the world, showing just how big they are. They really care about making their customers happy and always aim to do top-quality work. That’s why they’ve been the best in their main businesses for a super long time – almost 80 years!
What is EPC?
EPC stands for Engineering, Procurement, and Construction. It’s a type of contracting arrangement commonly used in industries like construction, engineering, and infrastructure development.
In an EPC contract, a single company or entity is responsible for the entire project, from the initial engineering and design (Engineering phase), through the procurement of materials and equipment (Procurement phase), to the actual construction and installation (Construction phase).
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News Headlines
Larsen & Toubro Iconic Projects so Far
The company has been involved in numerous iconic projects across various sectors. Some of the notable projects include: Chenani-Nashri Tunnel, The Statue of Unity, Mumbai Metro Rail, Navi Mumbai International Airport, Hyderabad Metro Rail, Rajiv Gandhi Sea Link, Hazira LNG Terminal, Kolkata Metro Line 2, Delhi International Airport Terminal 3, Kudankulam Nuclear Power Plant, The Baha’i Temple, Riyadh Metro, Motera Cricket Stadium, and more.
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Larsen & Toubro Ltd- Upcoming Projects
L&T Secures Rs 24,000-cr Contracts for Saudi Aramco’s Jafurah Gas Project”
In a significant development, Larsen and Toubro (L&T) Ltd has clinched two major engineering, procurement, and construction (EPC) contracts for Saudi Aramco’s ambitious Jafurah unconventional gas project. The first order, valued at nearly Rs 24,000 crore, pertains to the Jafurah gas development project. Additionally, L&T has secured a separate contract worth $1 billion (Rs 83.2 billion) for the construction of gas compression units.
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L&T, Indian Oil, and ReNew Join Hands for Green Hydrogen Venture
In a collaborative move towards sustainable energy solutions, Larsen & Toubro, Indian Oil Corporation, and ReNew Power Private Ltd have established an equitable joint venture for the development of their green hydrogen enterprise. This pioneering endeavor is materialized through the formation of GH4India Private Limited, as confirmed by L&T in an official regulatory disclosure. Each company will have an equal ownership in the endeavour under this cooperation, totaling 33.33%, indicating a balanced and cooperative commitment to promoting green hydrogen technology. Source: The Economic Times
L&T Commits $12 Billion Investment for Green Energy
India’s leading engineering firm, Larsen & Toubro Ltd. (L&T), plans to invest $12 billion over the next five years, with a third earmarked for expanding its clean energy ventures. This includes a significant $4 billion for establishing 2-3 million tonnes of green hydrogen and ammonia capacity. L&T Energy Green Tech, a subsidiary, will lead the clean energy charge and explore opportunities in fuel cells, grid batteries, and hydrogen vending. CEO SN Subrahmanyan is set to assume the role of group chairman in October, succeeding AM Naik.
L&T Construction Clinches Major Power Transmission Orders in UAE, Dubai and Kuwait
In a significant development, L&T Construction has secured substantial orders for its Power Transmission & Distribution Business. In the UAE, the company has been tasked with setting up a 220kV Gas Insulated Substation and associated Transmission Lines, commissioned by a prominent energy service provider. Additionally, they’ve received orders for the construction of 2 new 132kV Substations from a reputable public services infrastructure company in Dubai, along with an order for a 220kV overhead Transmission Line in the region. In Kuwait, L&T will lead the turnkey construction of 4 new 132kV Substations in the Al Sabah Medical District, encompassing Control, Protection, Automation, Communication systems, and relevant Civil & Mechanical works.
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Essentials & Financials: Larsen & Toubro Fundamental Analysis
Revenue and Growth: Over the past year, the company’s been quite busy, raking in an operating revenue of Rs. 195,369.85 Crores. That’s a hefty sum, highlighting some serious business action. And get this – they’ve seen a whopping 17% growth in revenue! Looks like they’re on a roll, expanding and grabbing a bigger piece of the market.
Profitability Ratios: When it comes to profitability, they’re holding their own. The Return on Capital Employed (ROCE) is at a decent 12.4%, and the Return on Equity (ROE) is not too shabby either, standing at 11.7%. These numbers basically say the company knows how to turn its resources and investments into profits.
Stock Evaluation: Now, let’s talk stocks. The Stock Price to Earnings (P/E) ratio is 36.8, which is actually lower than the industry average of 54. Translation? The stock might be a bit of a hidden gem, potentially undervalued compared to others in the same sector.
Earnings and Growth: In terms of earnings and growth, they’re showing some real consistency. The Earnings Per Share (EPS) is not just positive, it’s on the upswing. At 80.14 Rs per share, they’re clearly doing something right.
Debt and Equity Structure: Now, about their financial structure. The Debt to Equity Ratio is 1.3, a bit higher than the ideal 1. This means they’re leaning on debt a bit more to fuel their operations. It’s a strategy – can be a bit risky, but can also be a smart move for growth.
Dividend and Yield: Lastly, they’re giving back to their shareholders with a Rs. 24 dividend this year. It’s a small percentage, about 0.82%, but it’s a sign that they value their investors and want to share the profits. Nice touch!
Summing up! Few shortcomings but impressive fundamentals.
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SHAREHOLDING PATTERN
In the second quarter of 2023, Foreign Institutional Investors (FII) and Foreign Portfolio Investors (FPI) displayed a savvy move by boosting their holdings from 24.48% to 25.29%. Concurrently, Mutual Funds demonstrated a strategic shift by slightly reducing their stake from 17.60% to 17.46%. It’s noteworthy that the number of Mutual Fund schemes holding the company’s shares remained unchanged at 55. Meanwhile, promoter holding stands at 0, indicating that the company is likely widely held by public and institutional investors. Looking at the bigger picture, Institutional Investors showed astuteness, increasing their collective holdings from 63.48% to 63.66% in the same quarter.
Analysis Of Company’s Past Year Performances
All Time High: 3009.00 (12 Sep 2023) | All Time Low: 15.57 (20 Oct 1998)
L&T’s growth trajectory is akin to a strategic masterpiece. Over five years, a steady 3% CAGR, followed by 2% for three years. In the latest year, a remarkable surge at 22%—a testament to their dynamic strategies and unwavering commitment.
In terms of share performance: a solid 17% return over five years. Then, an impressive 48% return in the next three years. The most recent year, an exhilarating 51% return. In just the past six months, a notable 36.17% surge. An incredible journey of growth and success.
Let’s take a closer look at the company’s Return on Equity (ROE) performance: Over the last five years, the ROE has stood strong at a solid 14%. Moving on to the three years prior, it maintained a robust 13%. And in the most recent year, we’re looking at a solid 12%.
Examining the company’s compounded sales growth provides an interesting perspective: Over the past five years, there has been a steady 9% growth in sales. In the last three years, this growth has remained strong at 8%. Looking at the most recent period, the trailing twelve months (TTM), there’s been a significant surge with a 20% increase in sales.
Summing up! L&T has been showing upward trajectory for the past 5 years which makes it attractive.
L&T Stock split history
If you bought a Larsen & Toubro share before May 19th, 2004, you’ve made a smart move. The company has split its stock five times, with the latest one on July 13th, 2017. This means that one old share is now worth 4.5 shares! This shows how well Larsen & Toubro has been doing, and how early investors have really benefited.
L&T Stock split history
| Date | Split | Multiple | Cumulative multiple |
|---|---|---|---|
| 13-07-2017 | 3:2 | x1.5 | x4.5 |
| 11-07-2013 | 3:2 | x1.5 | x3 |
| 01-10-2008 | 2:1 | x2 | x2 |
| 28-09-2006 | 2:1 | x2 | x1 |
| 19-05-2004 | 1:2 | x0.5 | x0.5 |
When a stock undergoes a split, the overall value of the company remains the same, but the number of outstanding shares increases, and the price per share decreases proportionally. 9For example, in a 2-for-1 stock split, each shareholder receives two shares for every one they previously held, and the share price is halved. If you had one share worth $100 before the split, after the split you’d have two shares, each worth $50.
Important things to analyse closely- Limitations of L&T
Taking a look at the company’s performance over the last three years, we see a steady, if not spectacular, trend. Profit growth has been about 7.48%, showing that the company has been able to maintain and slightly improve its profitability during this period.
In terms of revenue, there’s been an increase of about 8.02%. This shows that the business has been effective in increasing its top-line revenue, even if it has done it more gradually than suddenly.
It is so evident that the firm has been continuously heading in the correct path, even though the growth rates may not be out of this world. These numbers demonstrate constant effort and advancement, which is usually a good indicator.
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Earnings & Revenues: Larsen & Toubro Fundamental Analysis
Over the course of the last year, the company witnessed notable financial growth. Annual revenue saw a substantial increase, rising by 17.3% to reach Rs 186,269.9 Crores. Simultaneously, annual net profit experienced a robust surge, soaring by 20.8% to Rs 10,470.7 Crores.
Moreover, the stock price demonstrated impressive performance, registering a remarkable 52.1% increase, surpassing its sector by 3.5% over the past year.
In the latest quarterly report, the company continued its upward trajectory. Quarterly revenue experienced a substantial YoY growth of 33.6%, reaching Rs 49,027.9 Crores. Quarterly net profit also surged significantly, rising by 46.5% YoY to Rs 2,493 Crores.
LT earnings for the last quarter are 17.73 INR whereas the estimation was 17.96 INR which accounts for -1.26% surprise. Company revenue for the same period amounts to 478.82B INR despite the estimated figure of 463.55B INR.
Estimated earnings for the next quarter are 21.16 INR, and revenue is expected to reach 494.41B INR.
Let’s Wrap it Up!
Summing up Larsen & Toubro Fundamental Analysis, the company has played a big role in some major projects both in India and around the world. Think airports, bridges, and power plants! This shows they can handle really big tasks. They’re not just in one place, but in over 50 countries! So, they’re not just local, they’re competing on a global level. They’re doing really well financially. They’re making good money and their profits are steady. This tells us they’re being managed really smartly
Disclaimer
The blog is meant for informational purposes and serves the general analysis of the stocks. Contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a period of time. The post does not consist any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfill their personal responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.
