Shares of Larsen and Toubro, also known as L&T, were off to a weak start on the bourses on October 25 after falling 2 percent to Rs 3,378 after UBS downgraded the stock to 'neutral' and slashed the target price as it saw a slew of headwinds in the coming quarters.
With a price target of Rs 4,000, the brokerage highlights an upside potential of 16 percent from the last closing price of Rs 3,443. The previous target price given by the brokerage was Rs 4,400.
L&T shares have slipped 11 percent in the past month.
The international broking firm suggests that even as core earnings remain supportive, it is anticipated there could likely be a slowdown in new order growth, which the market typically values more highly than core earnings for L&T.
Analysts at the firm believe that managing returns and cash flow will be critical as the company shows a reduced appetite for growing its order book. Despite these challenges, UBS notes that the valuation discount compared to industrial incumbents provides some comfort.
In August, the construction major's Power Transmission & Distribution (PT&D) vertical secured new mega orders, valued between Rs 10,000 crore and Rs 15,000 crore, to strengthen and expand electricity grids in the Middle East.
At about 9:40 am, shares of the company were trading at Rs 3,384, lower by 2 percent from the last close on the NSE.
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