InvestorQ : Why had Larsen & Toubro rallied sharply on Friday the 09 of October?
Anamika Sodhani made post

Why had Larsen & Toubro rallied sharply on Friday the 09 of October?

Answer
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Angel dcosta answered.
3 weeks ago


L&T rallied 4% to Rs.915 on the stock exchange after the stock got upgraded by Jefferies. The brokerage house has pegged the target price of L&T at Rs.1280, which is an upside of nearly 30% from current price levels.

Jefferies expects that the rapid recovery in macro investment cycle could actually see a pick-up in the company's order flow and valuations, as they are linked to the capital investment cycle. This will compensate for the margin contraction in GCC orders.

A major part of L&T's orders come from the hydrocarbon segment and heavy engineering, and these are expected to remain robust. Oil is beginning to see investments pick up in the post COVID scenario and that should be positive for L&T.

However, there are also short to medium term constraints in the form of labour shortages, demand contraction and social distancing norms. Despite the robust order flows, the margins are expected to be under pressure.

The consensus appears to be that while there is positivity in the stock, upsides could be limited due to the margin pressures that could sustain for some time.