This was discussed in Seligson’s latest review:
Since my last introduction, L&T has – yet again – been a weak investment. Including dividends and adjusted for the demerger of Luotea, it has returned only +4%, while Phoebus has returned +45% and our benchmark index +62%. So why do I still hold it in the portfolio?
Because there is plenty of potential and the valuation is quite cheap.
Over the last four years, the company has generated an average operating profit of €42m (9.8% of revenue). Its market capitalization is €255m, and with €95m in net debt (excluding IFRS 16 lease liabilities), the enterprise value is €350m – that is only 8 times operating profit, meaning the “debt-free P/E ratio” is 10x.
The potential has simply not materialized into growth, unlike with its competitors.