What is the prospects of L&T stock.
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ICICIdirect Research @SANDHYA NAGESH KINI - Fundamental view on Larsen & Toubro: Our research analysts have a HOLD rating on the stock with a target price of Rs. 1045 from a 12 to 15 months perspective.
For Q2FY21, the cash flow from operations (CFO) came in robust at | 2770 crore for Q2FY21 (Vs. | 1410 crore in Q2FY20). The company also declared special dividend of | 18 per share. Working capital to sale ratio stood at 26.7% for H1FY21 (Vs. 26.8% in Q1FY21) on account of lower revenue booking and company’s intent to support vendors amid challenging business environment.
L&T received net of tax cash proceeds of ~11000 crore from transfer of its Electrical & Automation (E&A) business which is likely to be utilised towards
a) | 2500 crore for dividends,
b) ~| 5000 crore towards retirement of debt taken as liquidity buffer during pandemic,
c) | 2000 crore towards investment in services business (incl. financial services),
d) | 2000 crore allocated towards Hyderabad metro restructuring.
L&T reported reasonable order inflows while execution is seeing green shoots of a revival despite productivity challenges that could improve over next few months. Also, preservation of working capital and cash proceeds from E&A has provided much needed comfort on the balance sheet front.
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