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Last Updated : Jan 28, 2013 04:04 PM IST | Source:

Accumulate L&T; target of Rs 1749: PLilladher

Prabhudas Lilladher is bullish on Larsen and Toubro (L&T) and has recommended accumulate rating on the stock with a target of Rs 1749 in its January 24, 2013 research report.

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Prabhudas Lilladher is bullish on Larsen and Toubro (L&T) and has recommended accumulate rating on the stock with a target of Rs 1749 in its January 24, 2013 research report.
“Larsen and Toubro (L&T) reported a moderate 10.2% YoY growth in net sales at Rs154bn in Q3FY13 exhibiting a tepid execution and was largely below our expectations. Excluding export revenues, sales were down by 6.1% YoY. Reported EBITDA included a forex MTM of Rs1.2bn. Adjusting to this, margins are expected to be at 100bps, down YoY at 10.4%. However, EBITDA including provisions stood at Rs14.7bn, with margins at 9.6% (flat YoY). Interest cost, though higher YoY, was stable on a QoQ basis, despite a QoQ reduction in debt of Rs12bn. OI was higher by 24.8% YoY, primarily on account of sale from a property (MIP workshop) in Southern India (Rs2bn approx). Thus, reported PAT at Rs11.3bn, grew by 13.1% YoY. Adjusted APAT (including MTM) is estimated to be at Rs9.8bn, flat YoY. NWC in Q3FY13 has been 17% (16.5% Q2FY13) of sales”
“E&C division registered a revenue growth of 11%, with 10.4% EBITDA margins (110bps down YoY). E&E business registered 6% sales growth, with EBITDA margin of 14.3% (340bps higher YoY). MIP business continued to show a weak performance, with 10% de-growth in sales and 310bps decline in EBITDA margins at 18%. Others segment, continues to be robust, with 30% YoY growth in sales at Rs33bn. However, EBITDA margins were at 23.2%, down 580bps YoY (on account of currency fluctuations). L&T had announced Rs110.6bn worth of orders in Q3FY13 on exchanges. However, the declared order inflows came in at Rs195.4bn (difference of Rs84bn). The management has not given any disclosures for these orders. However, these undisclosed orders to the extent of Rs20bn are more or less quantified as sales in E&E, MIP and Integrated engineering segments, as execution cycle is one year.”
“E&C margins were down by 60bps YoY in 9MFY13. Thus, there is some risk to our overall FY13E EBIDTA margin estimate of 11.3% for which the company needs to do 13.8% in Q4FY13E (flat YoY). Working capital scenario, which is currently stable QoQ, will take some time for revival. On core P/E basis, L&T is trading at 14.6x FY13E and 13x FY14E. On consolidated basis, it trades at 20.8x FY13E and 18.4x FY14E. L&T always stands to benefit from any improvement which happens in the Infrastructure sector, being the leader of the pack. A stake sale in subsidiaries and on track execution will lend some stability to this stock in and around the current levels. An improvement in margins is expected to re-rate it further. Thus, we maintain our 'Accumulate. rating and target price on the stock at Rs1,749,” says Prabhudas Lilladher research report.

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First Published on Jan 28, 2013 04:04 pm
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