Jefferies has reiterated its ‘Buy’ recommendation on Larsen & Toubro (L&T) and sees a 12% upside potential, setting a target price of Rs 3400 per share. The bullish stance is anchored in the backdrop of India’s ongoing capital expenditure upswing and L&T’s 45% outperformance compared to the Nifty Year-to-Date (YTD). This has prompted fund managers to explore the possibility of exemptions regarding defense-related concerns associated with holding L&T stocks.

The report also stated that one of the key factors impacting the stock’s performance is the potential for an ESG rating upgrade. An improvement in the ESG rating would not only validate L&T’s commitment to environmental and social responsibility but could also serve as an additional positive catalyst for investors.

The report highlights that, over the next 6-12 months, the traction in India’s capital expenditure cycle and the successful completion of legacy projects with low margins are expected to be key drivers for the anticipated upside. Despite muted guidance for the second half of the fiscal year 2024, analysts believe that the long-term prospects remain promising.