Buy L&T; skeptical on order inflow guidance: Religare

Misal Singh, Director- Institutional Research, Religare Capital Markets Limited is of the opinion that Larsen and Toubro is one of the better structural stories in India in terms of the capital goods space.

They maintain their buy recommendation on the stock with a target price of Rs 1800. Commenting on the order inflow guidance, Singh told CNBC-TV18, "A 20 percent kind of order inflow growth looks a bit aggressive given the macro environment that we are in." Also read: Dip in Q4 net fails to dent L&T's mood on orders in FY14 Below is the verbatim transcript of his interview on CNBC-TV18 Q: What is your view on overall performance of L&T this quarter and the forward-looking guidance? A: This disappointment from this quarter numbers is on the order inflow based revenue. They have written off about Rs 17,000 crore of orders and that is the disappointment. The margins as expected were weal for Q4. However, the guidance to me looks a bit aggressive; a 20 percent kind of order inflow growth looks a bit aggressive given the macro environment that we are in. Q: Are you skeptical on their guided order inflow of 20 percent? What sort of order inflow target would you possibly assume simply based on the fact that they have written off Rs 17,000 crore worth of orders based on slow moving projects? A: We require some more details as to what would be the visibility for that 20 percent kind of growth guidance that they have given on the order inflow. Given the macro environment we are in, we believe that it looks a difficult task to have a 20 percent kind of order inflow growth in 2014 unless the recovery is sooner than expected. Q: What is your recommendation on the stock now in terms of a target price and EPS estimate? A: We have a buy recommendation on the stock and we maintain that recommendation basically because the performance of L&T is also a reflection of where we are in the macro cycle. We believe that it is one of the better structural stories in India in terms of the capital goods space. We have a buy recommendation on the stock. The target price is Rs 1,800.