Prabhudas Lilladher is bullish on Larsen and Toubro has recommended buy rating on the stock with a target price of Rs 1710 in its research report date July 24, 2019.
Prabhudas Lilladher's research report on Larsen and Toubro
We maintain our BUY recommendation on L&T on the back of its strong business model with robust order book, diverse skill sets, strong execution capabilities and increased focus on improving return ratios by exiting non-core assets. L&T continued its strong order inflow momentum with 11% YoY growth at Rs387 bn in 1QFY20 (FY19 +16% YoY), led by Infrastructure and Power sector. Domestic order inflow was up 16% YoY, however international was flat. During the quarter, Electrical & Automation segment has been reclassified as discontinued operations. 1QFY20 revenues up ~10% YoY led by Infrastructure, Heavy Engineering and Services businesses. The revenue has mainly come from domestic market. EBITDA margin improved 100bps YoY to 11.2% mainly on account of decline in sales & admin expenses. NWC increased by 200bps YoY at 23% YoY due to delay in payments release by central & State governments and support to vendor chain. RoE at the end of 1QFY20 came in at 15.4% compared to 15.3% in 1QFY19. The company has maintained order inflow inflow/revenue growth/EBITDA margin (ex-services) guidance at 10-12%/12-15%/10-10.5% for FY20.
The company continues to focus on its strategic plan of achieving profitable growth and improving RoE in medium term. We maintain BUY with revised SOTP based TP of Rs1710 (Rs1744) on account of change in listed services entities.
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