From Infrastructure to Innovation: Why L&T Shines

L&T (Larsen & Toubro) is not just another company; it is often seen as a proxy for India’s infrastructure story because it is one of the largest and most diversified infrastructure companies in the country. It has a remarkable track record of executing large and complex projects across various sectors, including construction, engineering, manufacturing, and energy. 

Here’s why L&T is slowly becoming an investor favourite:

1. Impressive Order Book: As of September 2023, L&T boasts its highest-ever order book, valued at ₹4.5 trillion, with a whopping 72% year-on-year growth. This signifies a strong demand for their services, especially in the hydrocarbon segment, which is driving remarkable growth.

2. Competitive Advantage: L&T’s in-house design, engineering, and fabrication capabilities for critical equipment and systems give it a competitive edge. This self-reliance reduces costs and enhances efficiency.

3. Diversification Beyond Infrastructure: L&T isn’t limited to infrastructure alone. Through its subsidiary, it has ventured into IT services and solutions, offering a range of services such as data analytics, digital consulting, and cyber security. The merger of LTI and Mindtree has made L&T a significant player in the Indian IT sector.

4. Space and Defence Partnerships: L&T has been a trusted partner of ISRO for over five decades, contributing to India’s space missions. Its involvement in manufacturing critical equipment for space exploration is a testament to its technological prowess. L&T is also actively supporting India’s defence industry through partnerships with DRDO and the armed forces.

5. Forward-Looking Initiatives: L&T has embraced the digital age by launching digital platforms like L&T SuFin and L&T EduTech. These initiatives are poised to benefit from the global digitalization trend. Additionally, the company’s foray into designing semiconductor chips is well-timed to address the chip shortage issue.

6. Strong Financial Performance: L&T’s financials are impressive. In the last three years, it achieved a compound annual growth rate (CAGR) of 10% in revenue and 39.3% in net profit. The return on equity (RoE) and return on capital employed (RoCE) have shown substantial improvements.

7. Consistent Stock Growth: Over the past three decades, L&T shares have grown at a CAGR of 26.4%, outperforming the BSE Sensex benchmark index. This consistency in stock growth reflects the company’s stability and potential for investors.

In summary, L&T can be a good pick due to its robust presence in India’s infrastructure sector, diverse revenue streams, strategic technological partnerships, and a history of impressive financial performance. Moreover, the company’s forward-looking initiatives make it well-positioned to benefit from emerging trends. While investing always carries some degree of risk, L&T’s track record and strategic positioning make it a compelling option for long-term investors looking for steady growth in their portfolios.

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WEEKENDINVESTING ANALYTICS PRIVATE LIMITED is a SEBI registered (SEBI Registration No. INH100008717) Research Analyst