Exclusive: Kotak Securities Adjusts Price Target for Larsen & Toubro Ltd. (LT:IN) - What Does This Mean for Investors?
Kotak Securities, a leading investment firm, has adjusted its price target for Larsen & Toubro Ltd. (LT:IN) (OTC: LTOUF), a major Indian multinational powerhouse. The new price target of INR3,380.00 represents an increase from the previous target of INR3,150.00. Despite this adjustment, the firm maintains a Sell rating on the stock.
What's driving this change? Kotak Securities highlights the impact of recent oil price fluctuations on new orders from Saudi Arabia, which could affect Larsen & Toubro's order growth. Additionally, the firm expects the company's profit margins to reflect the influence of lower-margin renewable EPC contracts and declining steel prices.
The expert analyst at Kotak Securities has increased the Sum of the Parts (SoTP) valuation by 6% to INR3,380 to account for a projected improvement in the core Engineering & Construction (E&C) margin. This adjustment is based on a 40 basis points increase year-over-year.
Furthermore, the revised valuation includes a higher Fair Value (FV) for LTIMindtree (NS:) and extends the valuation timeline to September 2025.
Despite the upward revision in the price target, the Sell rating is maintained due to the perceived high trading multiple of 35 times the one-year forward core E&C earnings per share. This valuation is considered steep given Larsen & Toubro's international exposure and operational risks.
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**Analysis:**
In summary, Kotak Securities has revised the price target for Larsen & Toubro Ltd., expecting potential growth opportunities impacted by oil price changes and margin adjustments. While the new target reflects optimism about the company's future performance, the Sell rating suggests caution due to valuation concerns. Investors should consider these factors when evaluating their investment decisions to mitigate risks and optimize returns.