L&T shares jump 4% to hit one-year high today; here's why

Shares of Larsen & Toubro Ltd (L&T) rose sharply in Tuesday's trade to scale their one-year high level. The stock jumped 3.94 per cent to hit a 52-week high of Rs 3,008 over its previous close of Rs 2,894.05. Today's sharp upward move in the share price came after the company raised the the floor price of its Rs 10,000-crore mega-buyback offer. L&T, in an exchange filing, said, "The buyback price has been increased from Rs 3,000 per equity share to Rs 3,200 per equity share."

In addition, the construction major reduced the number of shares proposed to be bought back to 3,12,50,000 shares from 3,33,33,333 shares earlier, representing 2.2 per cent of the total paid-up equity shares of the company against 2.37 per cent earlier.

"One of the key objectives of the company's strategic plan, Lakshya 2026, is to enhance the return on equity (ROE) and thereby maximise shareholder value. Return on equity capital to the shareholders in the form of buyback of shares of the company is a step in that direction," L&T said.

On technical setup, the counter was last seen trading higher than the 5-day, 10-, 20-, 30-, 50-, 100-, 150-, 200-day simple moving averages (SMAs). The counter's 14-day relative strength index (RSI) came at 80.52. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a price-to-equity (P/E) ratio of 46.60 against a price-to-book (P/B) value of 5.69.

The scrip has an analyst target price of Rs 2,825, Trendlyne data showed, suggesting a potential downside of 5 per cent. It has a one-year beta of 0.90, indicating low volatility on the counter.

ICICI Securities has upgraded the stock to 'Buy' on strong consecutive order inflow for two quarters (Q1, Q2 FY24), which it said could likely result in beat to order inflow guidance for FY24.

The domestic brokerage talked about a significant buyback to reward shareholders and consequent improvement in RoE and expected expect margin improvement for core business amid benign raw material prices. "We upgrade the stock to 'Buy' with SOTP-based target of Rs 3,141 (assigning 30x FY25E to EPC business)," it said.

Till date in FY24, L&T has announced orders worth over Rs 75,000 crore. "With this significant accretion in orders, L&T could report over 20 per cent growth in order inflow in Q2 (excluding services), in our view," ICICI Securities said.

Meanwhile, Indian equity benchmarks traded lower in early trade today amid a highly volatile session. The domestic indices were dragged by metals, state-owned banks, consumer, automobile and energy stocks. Broader markets (mid- and small-cap shares) also felt the pain today.

Also read: Stocks that share market analysts recommended on September 12, 2023: HDFC Bank, Zomato, PowerGrid and GAIL India

Also read: Retail inflation data for August to be out today, iPhone 15, Apple Watch Series 9 launch at Apple Event 2023 in Top News on September 12: Share markets, Bank Nifty outlook, Kundan Edifice IPO to open

Also read: L&T, PowerGrid, Jupiter Wagons, HFCL, other stocks to watch on September 12, 2023