L&T Conundrum

[protrade]

Uddhav Thackeray’s move to review all projects underway in Maharashtra has ensured that L&T is available at an attractive price. But realistically, there is little the government can do about already awarded and in progress contracts.

Also, Nirmala Sitharaman’s announcement over the weekend, about a ₹ 100 lakh crore infrastructure impetus to the economy would definitely help L&T’s orderbook. It is inconceivable that India’s largest infra player doesn’t get a boost from such a massive program.

This could be the opportunity of a lifetime to pick up L&T at 16-x 2020 earnings!

 

[TradingFloor]

Uddhav Thackeray’s move to review all projects underway in Maharashtra has ensured that L&T is available at an attractive price. But realistically, there is little the government can do about already awarded and in progress contracts.

Also, Nirmala Sitharaman’s announcement over the weekend, about a ₹ 100 lakh crore infrastructure impetus to the economy would definitely help L&T’s orderbook. It is inconceivable that India’s largest infra player doesn’t get a boost from such a massive program.

This could be the opportunity of a lifetime to pick up L&T at 16-x 2020 earnings!

The only problem with LT is its in DT on Daily Time frame. Look at the chart below, for Swings or Position Traders its making LL and LH, trend needs to change before we can buy.

The momentum has picked up in DT see T2 and increasing gap from T1 Trend Line. Indicates Sellers are not finished yet. The price needs to stop making LL and LH and Break and Trade above Trend Line for us to go long.

If you Trade Major S/R Levels Watch below for the buy zones

1270-1280 S1

1180-12013 S2

1110 S3

We need to see PA at these levels to go swing or positional long or even average.

 

[siddhant4u]

10 year return of L&T is 73% when India was building every thing at record speed !!

 

[protrade]

This worry about slow order growth stems from a fundamental misunderstanding of the infrastructure business. L&T has a massive pending order book, which means its hands are full for the foreseeable future. An order received today will be serviced over next 3-10 years, depending on the magnitude of the order. This means L&T is actually best positioned to ride out a slowdown, and falls in the stock are the best opportunity to pick up the stock. Just executing current business, with zero new orders, implies that the company can sustain PE ratio of below 20 for next 3 years (current forward PE ratio is 16). And this slowdown will be resolved well within that time frame, for sure.

 

[protrade]

10 year return of L&T is 73% when India was building every thing at record speed !!

This is the classic problem with stock markets - people have greed when they should have fear, and they have fear when they should have greed. In boom times, just because L&T is signing up new orders, doesn't mean that the stock is a good buy at 33x earnings! And in slowdown, just because L&T is not signing up new orders, doesn't mean you should dump the stock at 16x earnings.

The advantage now, is that L&T is available at dirt cheap earnings, and with full potential growth in the order book, once the slow down ends. This is the best time to load up on L&T, and wait for the value expansion. This stock will easily be at 3000 when the economic cycle turns.

 

[TradingFloor]

All the order books and news are discounted in price almost 2-3 months before the news comes. I personally feel its a blunder to take entry exit based on such orders. Yes it does tell us the order book is strong but the falling price does not justify it.

 

[siddhant4u]

to add to what @TradingFloor said, govt of india has already spent whole year worth within first 6 months so market is not expecting extra-ordinary spending on infrastructure from govt. Besides, there could be payment delays on various infra projects.
LT could go down further and could be available cheap (just my hunch)

 

[protrade]

If you believe it is a good company, with a good management, good financials, and a good long term business to be in, short term problems are excellent buying opportunities.

And unless you are extremely lucky, you can’t catch the bottom. Better to pick it up gradually on way down, and consider yourself lucky if you get it cheaper.

Also, today is the last trading day before Nirmala Sitharaman’s expected announcement - so market seems to be reacting. Stock is already up almost 4% from its low this week.

 

[protrade]

Also, Indian market is notorious for manipulation. With F&O volumes much larger than cash volumes, it is trivial for people to manipulate stock lower in cash, while picking up serious size in F&O.

I believe the action earlier this week in L&T could be perfect example of this pattern.

 

[TradingFloor]

If you believe it is a good company, with a good management, good financials, and a good long term business to be in, short term problems are excellent buying opportunities.

And unless you are extremely lucky, you can’t catch the bottom. Better to pick it up gradually on way down, and consider yourself lucky if you get it cheaper.

Also, today is the last trading day before Nirmala Sitharaman’s expected announcement - so market seems to be reacting. Stock is already up almost 4% from its low this week.

1. The entire market went up and its not because of Nirmala Madam, please be aware about what's happening at global scale. The big guys already knew about the Trump china Deal. I guess big money allows them to have big friends and big friends share story with other big friends and not small Investor Traders.

2. The entire market went up, LT is good company so naturally some recovery came in this counter too.

3. Regarding your comment at catching the bottom, I did not want to comment further in this post, but somehow I feel this statement is misleading. What you may be missing is the mistake I have done a lot in my days of a Investor. Your are simply trying to catch a falling knife. If you wait for price to make HH and HL on a HTF then you may buy a little expensive but your ROI x Time will be much better. Please do the math. This does not mean that price can not go up from this level in LT, All that is required is to wait for Trend to change before we move in.

4. One exception to this rule can be to buy at major S/R levels. but it has to show a rejection of the breakdown of that level. Simply buying at that level in first attempt makes the trade very risky as we don't know how price will behave after touching that level. So I will make a marking for u below, when you see rejection of that level, On smaller time frame you can add your position. This will give you a quicker entry at better price.

Please read saint sir post regarding the same.