The strengthening of commodities, improvements in balance sheets and deployment of new technologies are the causes for uprising in investments by the private sector.
LT reported their first quarter earnings on 26th July 2022 with a Net Profit of Rs 1702 crore which is a 45 percent growth with respect to the same quarter of the last year. Stock was up almost 4% on Wednesday 27th July 2022, the day after the company reported its earnings.
LT’s domestic order book mix changed slightly with minor improvement of 1% in the private sector capital expenditure. A simple 1 percent might seem insignificant, however on a domestic order book of Rs 2.63 lakh crore, a 1% means Rs 2626 crore.
LT have made their balance sheets stronger and combined with the rally in commodities, are running investments into metals, minerals, and energy sector. The long stagnant thermal power sector is having a pipeline buildup.
The rollover to green energy and online commerce is bringing new investments, such as electric automobile plants and data centers.
L&T’s management alluded to improving private sector capex outlook in earnings call in May. The commentary and improving private sector share in the order book will please investors.
Many see L&T as a proxy for infrastructure and capex trends in India. Thanks to steady central government spends, L&T saw decent orders in the infrastructure segment in the recent past. Central government and public sector enterprises remain large contributors to L&T’s domestic orders.
LT took support at the 38.2% retracement level. MFI is almost at 70 which indicates the stock is closing into the overbought zone. However, considering the bullish outlook of the market, the stock can rally up to the swing high of Rs 2078. LT seems to be a good buy for the short term.