L&T gains 3% on significant order wins for water & effluent treatment biz

Shares of Larsen & Toubro (L&T) were trading 3 per cent higher at Rs 1,936.55 on the BSE in Friday’s intra-day trade after the engineering & construction company said it has won significant orders for its water & effluent treatment business.

The company did not disclose the exact value of the orders. The significant value of the project is between Rs 1,000 crore to Rs 2,500 crore, as per L&T.

The company said it has secured repeat orders from the Narmada Water Resources, Water Supply & Kalpsar Department, Government of Gujarat, to execute pumping system and pipeline works from Tappar Dam to Nirona Dam (Northern Link). This is the single largest order secured by the business in Gujarat.

The scope of work involves design, supply, construction & commissioning of pump houses & pipelines, with associated electrical & automation works. The turnkey project aims to strengthen water resources in Kachchh district of Gujarat by filling existing reservoirs that will irrigate 36,392 Ha of land, L&T said.

Including today’s orders, L&T has won a total of five ‘significant’ orders so far this month. In the global market, L&T Heavy Engineering secured a key order for the supply of Reactors for renewable diesel production from a prestigious client in Singapore. The company has also secured repeat orders from the Water Resources Department, Government of Odisha to execute Cluster XIX & Cluster XX Mega Lift Irrigation Projects.

L&T also won an order from a leading automobile major to construct a state-of-the-art manufacturing facility in Haryana, India. While the company’s power transmission & distribution business bagged an order to establish a 765kV Transmission Line in Gujarat.

In the past one month, L&T has outperformed the market with a 1 per cent decline as compared to a 3.4 per cent fall in the S&P BSE Sensex. In the last three months, it has rallied 17 per cent as against a 9 per cent gain in the benchmark index.

L&T is India’s largest engineering & construction (E&C) company with interest in EPC projects, hi-tech manufacturing and services. It primarily operates in infrastructure, heavy engineering, defence engineering, power, hydrocarbon, services business segments. Infrastructure segment contributes around 45 per cent to its consolidated revenue, followed by services at around 30 per cent.

During the April-June quarter (Q2FY23), EPC order inflows announced by L&T were in the range of around Rs 7500-17500 crore (as on date, ex-services segment) across railway, hydrocarbon, power T&D, water treatment, heavy engineering, buildings & factories segments indicating decent order inflows for the quarter amid challenging environment.

ICICI Securities expects decent pick-up in execution on a year-on-year (YoY) basis. According to the brokerage, working capital and cash flow management will be key monitorables.

L&T will focus on emerging portfolios like green EPC, manufacturing of electrolysers, battery & cell manufacturing, data centres and platforms (Sufin & Edutech), real estate in the next five years. L&T has targeted revenues and order inflow CAGR of 15 per cent and 14 per cent, respectively, in FY21-26 with a consolidated RoE of 18 per cent named Lakshya 2026. Focus on asset monetisation is expected to further strengthen the balance sheet and improve return ratios, ICICI Securities said.

It expects the company’s scrip to rally towards its life-time highs at around Rs 2,070 in coming months and outperform benchmarks.