InvestorQ : How should I approach the stock of L&T which has recently touched a 3-year low price? Is the stock now worth buying into?
indhumathi Sayani made post

How should I approach the stock of L&T which has recently touched a 3-year low price? Is the stock now worth buying into?

Answer
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shrinidhi Rajan answered.
7 months ago


Even as I respond to the query, L&T shares are hovering at a 3-year low. In a way, L&T reflects the woes of the economy more eloquently compared to market indices. L&&T has been one of the biggest laggards on the Nifty and the Sensex. This is a tad surprising because L&T is available at a one-year forward P/E multiple of 14. This is way below the average of 20X that has been trading over the last 1 year. But the real problem is that engineering and construction companies have displayed deteriorating trends and strained government finances. All this has created stress on their working capital leading to a tight liquidity situation. The bad news is that there were no big tender awards in January 2020 in the infrastructure sectors. L&T has the advantage of huge international orders (43%) but that is now hit by the virus scare. Hence, international orders remain cloudy due to falling crude oil prices. In the past, L&T has used its balance-sheet to help vendors but that looks increasingly difficult this time around.