Buy L&T; target Rs 1704: P Lilladher
Prabhudas Lilladher is bullish on Larsen & Toubro (L&T) and has recommended buy rating on the stock with a target price of Rs 1,704 in its March 06, 2013 research report.
March 07, 2013 / 11:15 IST
Prabhudas Lilladher is bullish on Larsen & Toubro (L&T) and has recommended buy rating on the stock with a target price of Rs 1,704 in its March 06, 2013 research report.
"L&T is certainly facing the turmoil of a slow economic growth environment. With a recent price fall (3M underperformance- 14.2% relative to Nifty and 16.7% on Absolute basis), despite a healthy set of announcements in the recently announced Budget, L&T is trading at P/E of 10.3x FY15E core earnings. However, with the recent news flow in terms of order intake being positive, L&T looks on a comfortable wicket and poised to end the year with a 15% order inflow growth.Order wins in Jan-Feb 2013 were close to Rs39bn which were a mix of B&F (Government), Defence, Hydrocarbon and Power. Further, with the impetus given to DMIC, DFC and other BOT projects in transportation (Budget 2013-14), along with a strong financial backing, we expect L&T to be able to secure sizeable orders. With just a month away from end of FY13E, order inflow stands at Rs640bn, implying Rs171bn order inflow in March 2013. Historically, Q4 has been a strong period where the order inflows are sizeable (Q4FY12: Rs211bn). Being in a slower growth environment, even if we assume a 19% YoY de-growth in order intake for Q4FY13E, FY13E order inflow will be higher by 15% YoY. Further, we are assuming a 10% YoY order inflow growth for FY14-15E, which has least chances of a negative delta.L&T is expected to clock a 20% CAGR over FY12-15E in revenues keeping the Book-to-Bill ratio (2.1-1.8x) trend more or less the same. Though we have not factored in a major downfall in the EBITDA margins (11%) over FY14E-15E, we have also not kept it higher. However, any adverse mix in terms of order inflow may alter the margins. We are expecting a 10% CAGR in standalone earnings for the period of FY12-15E which is again not an out-of-reach assumption.Though the price points have corrected sharply in the recent times, we see these levels as an entry point/increasing exposure to a stock in volatile times. At CMP, the stock is trading at a core P/E of 11.7x FY14E and 10.3x FY15E. We have also rolled over our valuations to FY15E. With no near-term risks attached and sheer under performance of the stock, we upgrade the stock from an accumulate to a buy with a target price of Rs 1,704," says Prabhudas Lilladher 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
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
