Shares of Larsen & Toubro (also known as L&T) had a weak opening on October 25. It fell 2 per cent to Rs 3,378 after UBS downgraded the stock to ‘neutral’ and cut its target price in view of several challenges in the upcoming quarters.
The brokerage has highlighted an upside potential of 16 per cent from the last closing price of Rs 3,443 with a target price of Rs 4,000. The previous target price given by the brokerage was Rs 4,400. L&T shares have declined 11 per cent in the last month.
The international broking firm suggests that although core earnings remain supportive, it anticipates that there could be a slowdown in new order growth, which the market typically gives more importance to than core earnings for L&T.
The firm’s analysts believe that managing returns and cash flows will be key as the company is less inclined to grow its order book. Despite these challenges, UBS notes that the valuation discount compared to industrial incumbents provides some relief.
In August, the construction major’s power transmission and distribution (PT&D) arm bagged new mega orders worth between Rs 10,000 crore and Rs 15,000 crore to strengthen and expand power grids in the Middle East.
At around 9:40 am, the company’s shares were trading at Rs 3,384 on NSE, down 2 per cent from its previous close.
