If You'd Invested Rs 10,000 in Larsen & Toubro Stock 10 Years Ago, Here's How Much You'd Have Today

Larsen & Toubro (L&T) stands as a titan in India's engineering and construction sector, shaping the nation's infrastructure landscape with remarkable vision and precision.

With a legacy spanning over 80 years, L&T excels in delivering innovative solutions across diverse industries, including civil engineering, defense, aerospace, and power.

The company's global footprint stretches to over 30 countries, allowing it to harness cutting-edge technologies and international best practices, making it a beacon of excellence in the construction arena.

With a steadfast focus on quality, safety, and customer satisfaction, L&T has established itself as a trusted partner for landmark projects, from iconic bridges to cutting-edge industrial facilities.

As it forges ahead, L&T is proving that its engineering prowess is not just about building structures but also about shaping a sustainable future for India and beyond.

Let's have a closer look...

About Larsen & Toubro

Larsen & Toubro, headquartered in Mumbai, Maharashtra, is a renowned conglomerate with a legacy spanning over eight decades.

Since its establishment, L&T has played a pivotal role in propelling India's infrastructure and industrial development forward. Operating across more than 50 countries, its impact reaches far beyond the borders of India, encompassing regions in the Middle East, Africa, and the Asia-Pacific.

L&T's diverse portfolio includes interests in construction, IT, manufacturing, and financial services.

However, their influence goes beyond mere business pursuits. The company is committed to sustainability and community welfare, actively participating in various corporate social responsibility initiatives.

Their efforts have been widely recognized through numerous awards, underscoring their exceptional performance across multiple domains.

In essence, L&T stands as a symbol of progress, innovation, and social responsibility, embodying a commitment to shaping a better future through its contributions to society and industry.

Larsen & Toubro vs Sensex

If you had invested Rs 10,000 in Larsen & Toubro 10 years ago, your investment would be worth Rs 31,856 today.

This represents a staggering 218.6% return over 10 years.

In comparison, the Sensex would have given you a return of 196.8% during the same period.

The stock has consistently performed since its listing on the exchanges. Since being listed in 2005, the stock price has rallied over 2,953%.

Despite the lows caused by the coronavirus pandemic in early 2020, Larsen & Toubro's shares have displayed remarkable resilience, bouncing back strongly.

Robust Financial Performance

For the first quarter of FY25, the company reported revenues of Rs 551 bn, representing a 15% increase. Additionally, group order inflows rose by 8%, totalling Rs 709 bn.

In specific business segments, the infrastructure sector reported order inflows of Rs 401 bn, remaining largely flat YoY. However, it achieved impressive revenue growth of 22%, reaching Rs 269 bn, driven by international project execution.

The energy segment secured numerous domestic offshore orders, with a potential order pipeline valued at Rs 2.62 trillion and revenues of Rs 85 bn, marking a growth of 27%.

The hi-tech manufacturing sector boasts an order book of Rs 338 bn, benefiting from improved margins due to cost-saving measures.

The IT technology services segment experienced a 6% increase in revenue, reaching Rs 115 bn; this growth was affected by subdued global macroeconomic conditions, yet the segment maintains a healthy pipeline of deals.

In financial services, L&T Finance achieved 95% retailization of its loan book, with retail disbursements increasing by 33%.

The operating profit for the quarter stood at Rs 70 bn, resulting in an operating profit margin of 13%.

Consolidated profit after tax (PAT) rose by 11% to Rs 34.4 bn, while the net margin slightly dipped to 6.2% compared to 6.5% in Q1 FY24.

Despite these positive financial results, challenges persist. A decline in hydrocarbon prospects due to potential project deferrals, along with labour shortages linked to ongoing infrastructure projects, could impact future performance.

Additionally, execution delays may arise as demand for skilled labour increases with the expansion of infrastructure investments.

On a brighter note, the total order book is now valued at Rs 4.91 tn, reflecting a 19% YoY increase. Of this, 62% is derived from domestic sources, while 38% comes from international markets, predominantly in the Middle East, which constitutes 92% of the international order book.

This diverse order pipeline positions L&T favourably for continued growth across various sectors.

Recent Developments

Recent developments include L&T Semiconductor Technology Limited acquiring a 100% stake in Silicon Systems, which enhances its capabilities in chip development for CCTV systems.

Additionally, the company is entering EPC opportunities in the oil-to-chemicals sector in the Middle East, with anticipated investments of $50 bn to $60 bn from clients.

What Next?

Looking ahead, L&T remains focused on the profitable execution of a large order book in a stable environment. The government's emphasis on public capital expenditure and private investments is expected to drive growth.

This growth will likely be supported by a recovery in domestic demand, driven by improving conditions in the agricultural sector and favorable monsoon outcomes.

Furthermore, L&T is working on carbon capture and cleaner energy projects, moving away from coal-based power generation.

The company is enhancing its capabilities in renewable energy, particularly in offshore wind and green hydrogen sectors. Overall, L&T appears optimistic about future growth, driven by government initiatives, infrastructure investments, and a strong order pipeline.

The management is confident in navigating challenges with a focus on execution efficiency and strategic investments in emerging sectors.

Long-Term and Value Investing Perspective on L&T

For long-term investors, L&T stands out as a company with significant growth potential. The diverse nature of its business segments, including infrastructure, energy, and hi-tech manufacturing, provides multiple avenues for revenue generation and growth.

Additionally, the company's commitment to innovation and sustainability aligns with global trends that are expected to shape the future of various industries.

As the demand for sustainable solutions and advanced technologies grows, L&T's strategic positioning will likely enhance its competitive edge over time.

This makes it suitable for those looking to hold shares for the long term, benefiting from both capital appreciation and dividend income.

Meanwhile, from a value investing perspective, L&T presents several compelling characteristics.

Value investors typically seek companies that are undervalued relative to their intrinsic worth, and L&T's consistent financial performance coupled with a strong balance sheet indicates that it could be undervalued in the current market.

The impressive order book and robust revenue growth suggest a solid foundation for future earnings, making it a potentially appealing candidate for those looking to invest in companies with strong fundamentals.

Conclusion

With a history spanning several decades, L&T has a legacy marked by excellence and continuous growth.

Despite its rich heritage, L&T remains forward-looking, constantly pushing boundaries and embracing innovation.

L&T's strategic focus on diverse industries-from civil engineering to renewable energy-positions it to capitalise on the growing demand for infrastructure development.

The government's emphasis on initiatives like the National Infrastructure Pipeline is further fuelling this demand, creating significant opportunities for companies in the sector.

Second, the broader industry is undergoing a transformation driven by increased investments in sustainable practices and green technologies. This shift is reshaping the engineering landscape and encouraging firms like L&T to adopt eco-friendly practices, aligning their operations with global sustainability goals.

Third, L&T's commitment to quality and customer satisfaction distinguishes it from competitors. With a strong order book and a pipeline of ambitious projects, the company is well-positioned to navigate challenges and leverage emerging opportunities in the evolving market.

L&T presents a robust case for long-term and value investors.

We encourage readers to look at L&T's financial factsheet and its quarterly results as the company is set to announce its financial results for the second quarter of FY25.

Stay tuned for insights that could illuminate L&T's path forward and contribute to informed investment decisions.

Happy investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...