Buy Larsen and Toubro; target of Rs 1237: Angel Broking

Angel Broking's report on Larsen and Toubro (L&T)

"We believe L&T will continue to occupy a unique position in the Indian E&C space as a diversified and large engineering play, with exposure to areas ranging from power, defense, nuclear and equipment, in spite of short-term concerns. Given its robust order backlog, healthy order inflows during the past few quarter, and strong execution capability, the company is well placed to achieve its guidance on both- order inflow and revenue front. It is also best placed to benefit from a gradual recovery in the capex cycle given its diverse exposure to sectors and a strong balance sheet. Going forward, on the back of healthy order book mix, we expect the company to report a revenue and PAT CAGR of 10.8 percent and 6.1 percent over FY2013-15 respectively."

"At the current market price of Rs 1,062, the stock is trading at 16.1x FY2015E earnings and 2.8x FY2015E P/BV on a standalone basis. We have used the sum of-the-parts (SOTP) methodology to value the company to capture all its business initiatives and investments/stakes in subsidiaries and other businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs 1,237. We maintain our Buy rating on the stock," says Angel Broking research report.

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