Larsen & Toubro Secures Mega Aramco Orders Worth $4 Billion

Larsen & Toubro (L&T), the Indian infrastructure giant, is set to embark on an ambitious journey with Saudi Aramco as it bags two substantial contracts worth nearly $4 billion in total. These contracts are part of Saudi Aramco's extensive expansion plans for the Jafurah unconventional gas production project in Saudi Arabia's Eastern Province. Here's the breakdown of the significant developments:

1. $2.9 Billion Contract for Gas Processing Plant

L&T has emerged as the preferred contractor for a $2.9 billion contract related to the Jafurah gas project. This project, with an estimated total budget of $110 billion, holds immense importance in Saudi Aramco's strategic plans.
Under this contract, L&T will be responsible for developing a gas processing plant and its main process units. The Jafurah basin, where this project is located, boasts the largest liquid-rich shale gas play in the Middle East, with an estimated 200 trillion cubic feet of gas in place.

2. $1 Billion Contract for Gas Compression Units

In addition to the gas processing plant contract, L&T has also secured a contract worth $1 billion for the construction of gas compression units. These units are a vital component of the Jafurah unconventional gas production project, which is poised to be the largest non-associated gas resource base in Saudi Arabia.

Strong Financial Growth for Larsen & Toubro

These two major contracts further solidify L&T's position as a key player in the global infrastructure industry. As of the end of FY23, L&T's order book stands impressively at ₹399,526 crore, representing a remarkable 12% year-on-year increase. The company's prowess extends beyond this recent accomplishment, with an extensive portfolio of projects that span the globe.

Other Recent Endeavors

L&T's impressive track record doesn't stop here. The company has also submitted bids for another package of orders worth $10 billion for Saudi Aramco's Safaniyah Gas Field. This diversification of projects demonstrates L&T's commitment to making significant contributions to the energy sector.

Furthermore, L&T recently secured a substantial order from an Australia-based joint venture between Saipem and Clough for the fabrication and supply of process and piperack modules for 2.3 (MMTPA) urea plant for Perdaman Chemicals and Fertilisers. This underscores L&T's global presence and expertise in delivering complex engineering solutions.

Looking Ahead

L&T's successful foray into these Saudi Aramco projects reflects its dedication to enhancing its capabilities and expanding its international footprint. As the company continues to secure prestigious contracts, it remains at the forefront of the engineering and construction industry.

L&T Gains Favorable Ratings and Bullish Outlook from Analysts

Larsen & Toubro (L&T) is currently receiving significant attention from analysts, with 38 out of 41 analysts recommending a buy. Six of these analysts believe L&T's stock will surpass its ₹3,000 buyback price. L&T's ₹10,000 crore share buyback program has also bolstered investor confidence.

CLSA Sets Highest Target at ₹3,240

CLSA maintains a buy rating and sets the highest target on the street at ₹3,240. They attribute this to a substantial Middle East order, emphasizing L&T's preferred contractor status with Saudi Aramco.

Citi Remains Bullish with a Target of ₹3,175

Citi keeps its buy recommendation, targeting ₹3,175. They note L&T's expanded prospects and the buyback program's positive impact on shareholder confidence.

Morgan Stanley Sees Growth Potential

Morgan Stanley remains optimistic, with an overweight rating and a target of ₹2,935. They highlight the Middle East order's significance and Saudi Arabia's transformation.

L&T's shares have surged by nearly 40% in 2023, reflecting growing optimism about the company's future prospects. Analysts collectively endorse L&T's strong position and potential for growth, particularly in the Middle East. Investors are closely monitoring the company's developments.