Moneycontrol
Dec 01, 2016 06:36 PM IST IST | Source: Moneycontrol.com

Buy Larsen & Toubro; target of Rs 1541: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Larsen & Toubro has recommended buy rating on the stock with a target price of Rs 1541 in its research report dated November 22, 2016.



Prabhudas Lilladher's research report on Larsen & Toubro


L&T’s performance for 2QF Y17 was in line with estimates. They reported PAT of Rs 10.3 bn, up 41% YoY though sales and margins were below our estimate. While execution and margin remained muted in infrastructure segment, improved performance in Hydrocarbon and Heavy engineering helped maintain margin. Domestic execution continued to remain weak (up 3% YoY). Order inflow was up 11% YoY led by domestic orders (up 35% YoY). L&T highlighted that the domestic capex is picking up in selective areas like Roads, railways, defence, T&D, water etc. Working capital also saw improvement to 22.5% of sales (Vs 23.5% in Q1FY17). L&T maintained its guidance for sales growth of 12‐15%, order inflow growth of 15% and margin improvement of 50bps in FY17. We have cut our earnings estimate by 4% for FY17& FY18 to factor in weak execution. The company continues to focus on its strategic plan of achieving profitable growth and improving RoE in medium term. We Maintain ‘BUY’ with TP of Rs 1541 (Previous Rs 1590) given its strong business model, diverse skill sets, strong execution capabilities and relatively healthy/large balance sheet.


The stock is trading at 15xFY18E earnings. We have cut our earnings estimate by 4% for FY17& FY18 to factor in weak execution. The company continues to focus on its strategic plan of achieving profitable growth and improving RoE in medium term. We Maintain ‘BUY’ with TP of Rs 1541 (Previous Rs 1590) given its strong business model, diverse skill sets, strong execution capabilities and relatively healthy/large balance sheet and being the go to go company in the Indian infrastructure space. We expect company to deliver 21% earning CAGR over FY16‐18E. Maintain ‘BUY’.

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