Accumulate L&T; target Rs 1856: Sushil Finance
Sushil Finance is bullish on Larsen and Toubro (L&T) and has recommended accumulate rating on the stock with a target price of Rs 1856 in its January 25, 2013 research report.
January 30, 2013 / 13:00 IST
Sushil Finance is bullish on Larsen and Toubro (L&T) and has recommended accumulate rating on the stock with a target price of Rs 1856 in its January 25, 2013 research report.
"During Q3FY13, L&T delivered 10.3% Revenue growth, mainly due to strong 144% YoY growth achieved in international business led by order wins in hydrocarbon segment. The Gross Revenues of E&C segment grew by 10.8% YoY to Rs. 138,818 mn, led by its strong order book and project execution. However, the Revenues from its Machinery & Industrial Products segment declined 8% YoY to Rs. 5,932.2 mn, due to continued sluggishness in industrial demand & mining activities, while the Revenues from its Electrical & Electronic (E&E) segment grew 5.3% YoY to Rs. 8,865 mn, due to subdued industrial off-take & tight liquidity condition of SMEs. In view of strong 9M performance, the management has maintained its 15-20% Revenue growth guidance for FY13, which we believe is achievable considering its strong order book and increased execution from infrastructure & power T&D segment and strong export order wins in hydrocarbon segment.During Q3FY13, its EBITDA grew by 7.8% YoY to Rs. 14,749.3 mn, while its EBITDA margins fell 20 bps YoY to 9.6%, mainly due to higher input cost and subdued performance of products business. Its adjusted Net Profits (APAT) grew by 13.1% YoY to Rs. 11,217.5 mn. During the quarter, its E&E segment's margins improved 260 bps YoY owing to better price realizations & favorable product mix, while the E&C biz's margins contracted 110 bps due to high input cost & change in job mix. The management expects its E&C EBITDA margins for FY13 to remain in the range of 10.5-11%, a reduction of 50-100 bps YoY.During Q3FY13, L&T's outstanding order book grew by 11% YoY to Rs. 1,623 bn, while its order inflows grew 14% YoY to Rs. 195 bn (22% YoY growth in 9MFY13). During 9MFY13, the company witnessed fast investment decisions in transportation, urban Infra & water infra sectors, which contributed significantly to its strong order inflows, while the ordering environment in Power generation EPC & Mining Projects remained sluggish. Going forward, the pick-up in domestic infra projects, Hydrocarbon project in Middle East, Power T&D segments, will continue to provide order inflow momentum. Considering the current domestic market environment and its business outlook of export market, the management maintained its order inflows growth guidance at 15- 20% during FY13, which looks possible considering its 9MFY13 order inflows growth of 22%. The current order bookprovides Revenues growth visibility for next two years and we expect L&T to deliver decent Revenue growth in ensuing period.Despite the tough business environment for Infrastructure & capital Good segments, L&T has delivered strong 22% growth in 9MFY13 Order inflows at Rs. 601 bn, while its outstanding Order book also grew at 11% to 1,623 bn and provides decent growth visibility for next two years. Going forward, its continued focus on international market especially in middle & Far East regions and improvement in domestic market especially in Hydrocarbon segments, the management is optimistic of achieving 15-20% growth in FY13 order inflows. We believe L&T, being the India's largest E&C player with its strong execution capabilities & long track record is very well positioned to capitalize business opportunities and deliver decent growth going forward. In view of its 9MFY13 performance and growth outlook, we have marginally reduced our FY13E & FY14E Revenues estimates, while have largely maintained our FY13E & FY14E APAT estimates.We expect L&T's Revenues to grow by 17.1% & 17.6% in FY13E & FY14E, respectively, while its APAT to increase by 13.5% & 10.8% in FY13E & FY14E, respectively. At CMP of Rs.1607, the stock trades at 18.3x & 16.7x its FY13E & FY14E consolidated EPS of Rs.87.7 & Rs.96.5, respectively. We change our rating to 'Accumulate' with SOTP target price of Rs. 1,856," says Sushil Finance research report.Non-Institutions holding more than 90% 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!
