Buy Larsen and Toubro; target of Rs 1675: ICICI Direct

ICICI Direct's research report on Larsen and Toubro

L&T's standalone revenues for Q1FY20 grew 16.3% YoY to Rs 17672 crore (above our estimate of Rs 16716.2 crore). Proforma standalone revenue grew 16.7% to Rs 16498.9 crore (excluding E&A business). On a consolidated basis, revenues (excluding E&A business) grew 9.7% to Rs 29636 crore YoY. On a standalone basis, infrastructure & heavy engineering segment revenues grew 16.8% to Rs 13356.7 crore and 163% to Rs 991 crore YoY, respectively. L&T registered strong order inflows of Rs 38700 crore at the group level, up 11% YoY while the order backlog was at Rs 294014 crore, up 21% YoY. Standalone EBITDA margins came in at 7.4%, down 100 bps owing to stage of execution and job mix. Consolidated PAT came in at Rs 1473 crore, up 21% YoY. Net working capital ratio deteriorated 200 bps to 23% YoY. Note: E&A business reported as discontinued operations.

Outlook

We value L&T on SoTP (with base business at 20x FY21E EPS) with a revised target price of Rs 1675 and maintain BUY on L&T.