L&T likely to post 15-17% EPS growth in FY15: Ambit Cap

Nitin Bhasin, analyst- Infrastructure, Ambit Capital is bullish on engineering and construction major Larsen and Toubro and expects the company to post earnings per share (EPS) of 15-17 percent in FY15.

"We have not changed expectations significantly because we think that the management and whatever they are guiding is possible in terms of expectations of revenues, margins," adds Bhasin in an interview to CNBC-TV18. The company's Q4 results disappointed the street on all parameters. It's total income rose lower than expected 10 percent Y-o-Y to Rs 20,294 crore during the fourth quarter. Below is the edited transcript of Bhasin’s interview to CNBC-TV18. Q: Your thoughts on what happened with Larsen & Toubro (L&T) yesterday and whether you have changed expectations for that stock significantly? A: We have not changed expectations significantly because we think that the management and whatever they are guiding is possible in terms of expectations of revenues, margins. I do not think we need to change our view. Market is getting worried about after yesterday’s performance. It is to be worried but not that much that we think that if it were to be built in realistic expectations, those will not be met.

Q: This year we did not see great growth in the absolute level of the EBITDA or profit after tax (PAT) for L&T. What kind of absolute earnings per share (EPS) number are you predicting for FY14? A: Looking at next year, we are thinking about 5-6 percent growth on the adjusted EBITDA and similar kind of a number flowing down to EPS. Therefore, adjusted number for next year would be Rs 78 kind of an EPS. Q: Where does that leave valuation, Rs 78 with a stock at Rs 1,500 thereabouts is almost 18-19 times. Is there more room for upward rerating here? A: The financial year 2014 is going to be another year of a step down in terms of margins going down by another 20 bps or so and because of this, one will not see the EPS growth playing out. However, if one looks at FY15, then that is where we are thinking that it will stabilise towards the end of 2014 and 2015. The topline growth will translate into bottomline growth as well. So, in FY15 post election we are expecting 15-17 percent growth in the EPS.