Should you buy, sell or hold L&T post-Q1 earnings?

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Larsen & Toubro’s share price rose 1% on July 27 after the company recorded a nearly four-fold jump in its June quarter net profit. L&T posted a consolidated net profit of Rs 1,174 crore, up 287% year-on-year primarily on low-base effect, as against Rs 303 crore net profit in the year-ago period in Q1. Revenue for the said quarter came in at Rs 29,334.73 crore, up 38% as against Rs 21,259.97 crore posted in Q1 FY21.

The stock price has already shot up 23% year-to-date and 75% in the last one year. The question investors are asking is whether it makes sense to invest in the stock after the sharp run-up right now.

Here’s what brokerages are saying:

Edelweiss | Buy | Target | Rs 1,975

Larsen & Toubro (L&T) missed consolidated EBITDA estimate by 6% despite in line revenue versus consensus, YoY core profitability was healthy aided by infra & engineering. Though headline revenue came in line, the management appears incrementally positive with comprehensive stress on growth, return and cash parameters, we expect better bottom-line translation with robust ESG  (Environmental, Social, and (Corporate) Governance) focus.

We retain ‘BUY’ with a revised target price of Rs 1,975 revised upward from Rs 1,880 earlier.

Prabhudas Lilladher | Buy | Target: Rs 1,855

L&T can emerge stronger given its financial, technical & managerial capability for sustaining and gaining market share. Given a strong business model, robust bid pipeline, diversified order book and healthy balance sheet, it assigns buy rating to the stock with a revised target price of Rs 1,855.

The change in target is driven by 10% rise in core EPC (engineering procurement and construction)  multiple, owing to strong visibility and rise in target market capitalisation of subsidiaries.

Jefferies | Rating: Buy | Target: Rs 1,900

The company’s Q1 EBITDA was 12 percent below expectations as E&C (engineering and construction) sales missed estimates. The pandemic-induced delays, including fatalities & local lockdowns, impacted execution.

The order flow was up 13% YoY (FY22 guidance at 13-17%), while the prospect pipeline is up 42% YoY and the management is optimistic on the outlook.

Citi | Rating: Buy | Target: Rs 1,785

The company remains one of the top picks of the broking house. Citi has kept the ‘buy’ rating on the stock as company posted solid margin performance and expectedly soft execution.