Prabhudas Lilladher's research report on Larsen and Toubro
Larsen & Toubro (LT) reported a healthy quarterly performance with revenue growth of 22.2% YoY to Rs358.5bn, largely driven by improved execution in infrastructure segment and better growth in IT & Technology services business. Order inflows came in at Rs418bn, due to improving order finalization in domestic market and large order wins in international markets. Order book (OB) stands strong at Rs3.6trn (2.2x TTM revenue). Tender prospects for 9MFY23 stands at Rs7.6trn comprising of domestic (Rs 6.1trn) and international market (Rs1.5trn). Net working capital (NWC) to sales improved to 20.9% vs 22.9% in Q1FY22, owing to better collections during the quarter. Hyderabad metro performance is expected to improve in FY23, on back of improved ridership, assistance from Telangana government and refinancing of debt. Given healthy OB and tender prospects, management maintained its revenue and order inflows growth guidance of 12-15%, with core EBITDA margin of ~9.5%. for FY23. NWC to sales to be ~20% (20-22% guided earlier).
The stock is currently trading at PE of 23x/20x FY23/FY24E. We maintain our ‘Buy’ rating on stock with revise TP of Rs2,030 (Rs2,091 earlier), factoring in revised valuation for subsidiary businesses.
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