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Buy Larsen and Toubro; target of Rs 1528: Axis securities

Axis securities is bullish on Larsen and Toubro and has recommended buy rating on the stock with a target price of Rs 1528 in its research report dated February 1, 2016.

February 05, 2016 / 18:10 IST
     
     
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    Axis securities's research report on Larsen and Toubro L&T’s Q3FY16 adj. PAT at Rs8.3bn (down4% YoY) was inline with our estimate.However, core E&C margin at 7.6% (down by 330 bps YoY) missedour estimate of 9.4% led by poor performance of Infra, Heavy Engineering and MMH segments. Consequently, management lowered its FY16 margin guidance and now expects expansion in EBITDA margin of 0-100 bps(vs. 100 bps expansion guided earlier). Sharp recovery in Q4 margin to be driven by large Infra projects reaching profit recognition stage. Order inflow at Rs 385 bn (up 11% YoY) was above expectations. However, management lowered its guidance for order inflow growth to flat now vs. 5-7% earlier.NWCtoo improved marginally to 23.6% of sales (vs. 24% in Sep’15 and 25.5% in Mar’15).We cut our consolidated EPS toRs47/ Rs59for FY16/FY17 respectively (vsRs 52/Rs 66 earlier) adjusting for revised margin guidance given by the company. Our revised SoTP-based TP is Rs1,528 (22x FY17 standalone + VoI of Rs496). Maintain BUY on strong cash generation and improvement in return ratios on asset sales.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

    first published: Feb 5, 2016 06:10 pm

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