Accumulate L&T; target of Rs 1442: KRChoksey

KRChoksey is bullish on Larsen and Toubro (L&T) and has recommended accumulate rating on the stock with a target of Rs 1442 in its July 24, 2012 research report.

“L&T registered robust net sales growth of 26.1% on a YoY basis as net sales increased to Rs 11,955.4 cr, on back of strong growth in E&C segment. However, operating profit margins declined sharply by 279bps to 9.1% on account of forex MTM loss of Rs 267 cr. On adjusted basis L&T registered OPM% of 11.3%, in line with expectations. Other income increased sharply to Rs 605.8 cr vs Rs 314.2 cr on account of dividend from subsidiaries and associate companies as well as treasury income. Thus, robust execution and healthy other income helped PAT to increase by 15.7% to Rs. 863.6 cr. Order inflows during the quarter increased by 21% YoY to Rs 19,594 cr. Order backlog at the end of the Q1FY13 stands at Rs.153,095 cr, 2.75x TTM sales.”

“Net Sales increased by 26.1% YoY, led by strong order execution in E&C segment. Revenues from E&C segment increased by 30.2% to Rs 10,388 cr from Rs 7,977 cr in Q1FY12. Execution of project is mainly on track except few projects facing delays on account of clearances. For FY13E, the company maintained its 15% to 20% sales growth guidance. Operating margins declined sharply by 279 bps on YoY basis to 9.1%. Sales, Admin and other exp increased sharply from 3% of sales to 4.8% of net sales. Company incurred forex loss of Rs 267 cr which are included in other exp. Of Rs 267 cr, ~ Rs 160 cr is MTM on loan liability and remaining Rs.100 cr are business related (receivable, payables, forwards contracts, etc). On adjusted basis EBIDTA% stands at 11.3%. Order inflow increased by 21% to Rs. 19,594 cr vs Rs. 16,190 cr in Q1FY12. Growth in order flows was backed by spill over of FY12 orders. Infrastructure orders constituted 65% of the order inflow followed by power transmission segment (21%). Consequently current order backlog stands robust at Rs. 153,095 cr vs Rs. 136,172 cr in Q1FY12. Management maintained its FY13 order inflow guidance.”

“L&T delivered the results ahead of estimates. The company has demonstrated strong execution and is best placed among its peers to benefit from revival in industrial capex. However, considering recent run up in stock price we change our recommendation on the stock to “ACCUMULATE” from “BUY” with price target of Rs 1,442 ( based on SOTP based valuation and by assigning multiple of 15 times to its FY13E stand alone EPS of 76.1),” says KRChoksey research report.   

Bodies Corporate holding more than 50% in Indian cos

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.

To read the full report click on the attachment

Read More