A company is said to be ‘fundamentally strong’ when it portrays a specific set of characteristics such as strong and consistent financial performance, lower leverage ratios, and many more.
Listed below is one such fundamentally strong stock that one should buy now for a potential upside of 25 percent:
Larsen & Toubro Limited
With a market capitalization of Rs 4.81 lakh crores, the stocks of Larsen & Toubro Limited are currently trading at Rs 3,498.55, gaining approximately 0.80 percent compared to the previous closing levels of Rs 3,469.80 apiece. In the past six months, the company’s stock gained nearly 30 percent for its stakeholders.
During the recent financial quarters, the company’s prime business indicators, viz, operating revenues as well as after-tax profits, showed movements in opposite directions.
The former, on one end, rose from Rs 51,024 crores during Q2FY24 to Rs 55,127 crores during Q3FY24, and the latter, on the other end, dipped from Rs 3,855 crores to Rs 3,594 crores due to increased costs and interest obligations.
Despite the bottom-line blows, the company has managed to increase its return ratios with the return on equity (RoE) increasing from 10.52 percent during FY21-22 to 11.72 percent during FY22-23 and the return on capital employed (RoCE), during the same period, rising from 10.91 percent to 11.99 percent.
Having a positive outlook, CLSA, one of the leading brokerages and investment groups in Asia, has given a ‘Buy’ tag to the stocks of L&T with a target price of Rs 4,360 per share, indicating a potential upside of around 25 percent compared to the prevailing stock price level.
One of the major factors for the brokerage firm being bullish on the company’s stock is the healthy order inflows of the company, beating expectations, and expectations of improvements in margins from Q4FY24.
In addition, the brokerage added that the company’s revival in private capex plans, stable oil prices for prospects in the hydrocarbon segment, and improving the overall prospects in the Middle East contribute to its quoted target price.
The latest shareholding pattern data of the company portrays the Public (retail) Investors holding a 36.8 percent stake followed by the Foreign Institutional Investors (FIIs) holding a considerable stake of 25.5 percent in the company.
Larsen & Toubro Limited (L&T) is an India-based conglomerate company involved in varied business segments, i.e., constructing various facilities, developing solutions for offshore and onshore hydrocarbon projects, serving power plants, building ships, and performing other engineering projects.
Written by Amit Madnani
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