Larsen & Toubro surges as Q2 results defy market 'skepticism'

LT is considered a bellwether for India's infra spending due to the scale of orders it receives, but its international business helped it to a bigger second-quarter profit and gave it confidence that orders would grow by 10% this fiscal year.

Shares of India's Larsen Toubro surged nearly 7 per cent on Thursday, set for their best session in over three years, after the infrastructure developer surprised the market with strong execution in a seasonally weak quarter and kept its forecast.

LT is considered a bellwether for India's infra spending due to the scale of orders it receives, but its international business helped it to a bigger second-quarter profit and gave it confidence that orders would grow by 10 per cent this fiscal year.

The India business has experienced a slowdown since the general elections that ran from mid-April through June, when major projects were put on hold.

"Going into the (Q2) print there was skepticism," Morgan Stanley said in a note. But the results ticked "all boxes".

Bernstein analysts said, "We were expecting the worst."

LT's shares were last up 7 per cent at 3,648 rupees. They were the second-biggest percentage gainer on the blue-chip Nifty 50 index, which was down 0.4 per cent.

At least five of the 30 analysts covering the stock raised their rating, while at least eight raised their price targets, according to LSEG data.

LT's international business contributed 52 per cent of total second-quarter revenue, rising from a 43 per cent share a year earlier and overtaking the dominant domestic business.

"The international hedge is working," said Bernstein, while CLSA said LT is "not a hostage" to India's growth softness.

LT's total order inflow fell 10 per cent on-year in the quarter, mainly due to a high base a year ago, when orders jumped 72 per cent.

Bernstein said the decline was not surprising.