L&T Well Positioned To Benefit From Government's Capex Push: Morgan Stanley
Morgan Stanley upgraded the target price on L&T to Rs 2,827 from Rs 2,401.
Indian engineering, procurement, and construction companies like Larsen & Toubro Ltd. are well positioned to take advantage of the continued thrust of public capex by the government, according to Morgan Stanley.
The overall investment rate will rise to 36% of GDP by FY27 from 31% of GDP in FY22, which implies total investment growth (nominal) will average 16.7% in the next five years against an average growth of 8.8% in the last five years, the brokerage estimates in their March 8 note.
Due to the government's focus on public capex, the note said, there is increased evidence of a strong revival in the private capex cycle across multiple sectors, the note said.
"L&T is a natural monopoly in its business given its scale. Despite its size differential, it compares favourably to its peers on the lines of order inflow growth, a diversified order book, improving execution and revenue growth, lower volatility in margins, and well-managed working capital," the brokerage said.
Morgan Stanley upgraded the target price on L&T to Rs 2,827 from Rs 2,401, given the higher base case and bull case, while keeping the bear case multiple unchanged.
Shares of the company gained 1.38% to Rs 2,170.8 at closing, while the benchmark Nifty 50 declined 0.24%.
Out of the 45 analysts tracking the company, 44 maintain a 'buy' rating and one recommends a 'sell' on the stock, according to Bloomberg data. The 12-month consensus price target implies an upside of 13%.