Larsen & Toubro Limited (NSE:LT) (BSE:500510)

Larsen & Toubro (L&T) Limited is India-based technology, engineering, construction and manufacturing company. The company operates in 5 segments includes Hydrocarbon, IT & Technology Services, Financial Services, Developmental Projects and Others comprising Realty, Shipbuilding, Ready Mix Concrete, Mining and Aviation. While its segments at the standalone level : Infrastructure, Power, Metallurgical and Material, Handling, Heavy Engineering, Electrical and Automation, Machinery and Industrial Products. Bhilai power supply company limited, Ewac alloys limited, Hi-tech rock products & aggregate limited, L&T Access financial advisory services limited ,L&T Ahmedabad-Maliya tollway limited are few of the subsidiaries of the company. L&T Infrastructure Development Projects Limited (L&T IDPL) and Tata Steel Limited (Tata Steel) sold 100% interest in The Dhamra Port Company Limited.

Official website: www.larsentoubro.com

Standalone numbers disappoint: For 4QFY2015, Larsen & Toubro (L&T) reported a decline of 5.5% yoy in its standalone top-line to Rs18,968cr, reflecting lower revenue booking across Power, Metallurgical & Material Handling (MMH), Heavy Engineering (HE) and Others segments. EBITDA margin for the quarter was down 132bp yoy to 13.1%, on account of surge in SGA expenses. Reported PAT declined by 24.3% yoy to Rs2,061cr, owing to higher depreciation and interest expenses. Order inflow for the consolidated entity increased by 39.1% yoy during the quarter to Rs47,582cr; the total consol. order inflow for FY2015 stood at Rs1,55,367cr (up 22% yoy). L&T’s order backlog stands at Rs2,32,649cr, thereby giving revenue visibility for over the next 30 months. Hydro-carbon continues to be in red: In 4QFY2015, the Hydrocarbon subsidiary reported an 1% yoy revenue growth to `2,200cr. During the quarter, this vertical reported a negative 6.8% EBITDA margin vs negative 5.4% in 4QFY2014. Key Positives: Strong order book growth in FY2015; positive Management commentary on the award outlook front; easing of net WC cycle on qoq basis. Key Negatives: Miss on revenue guidance; continued losses at Hydro-Carbons business. Outlook and valuation: L&T’s diversified presence, and an anticipated recovery in the capex cycle coupled with the company’s strong balance sheet comfort us. L&T is well positioned to benefit from a revival in the award activity environment. With order backlog expected to grow, execution should pick-up from here-on. We have valued the company using sum-of-the-parts (SOTP) methodology, to capture the value of all its businesses and investments. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries (using P/E, P/BV and M-cap basis), we arrive at a FY2017E based target price of Rs2,013. We are of the view that L&T is a good proxy play for investors wanting to ride on the revival of the Indian infrastructure growth story. Given the 18.2% upside potential in the stock from the current levels, we maintain our Buy rating on the stock.

Source: http://www.angelbroking.com

Standalone numbers disappoint: For 1QFY2016, Larsen & Toubro (L&T) reported 3.6% yoy increase in its standalone top-line to Rs10,710cr, reflecting lower revenue booking across Infrastructure, MMH and HE segments. EBITDA margin for the quarter is down 142bp yoy to 9.1%, on account of surge in SGA and employee expenses. Reported PAT declined by 21.6% yoy to Rs701cr, owing to higher interest expenses. Order Inflows for consolidated entity declined 21.0% yoy to Rs26,376cr. L&T’s order backlog stands at Rs2,38,973cr, thereby giving revenue visibility for over the next 30 months. Hydro-carbon turns-around: In 1QFY2016, the Hydrocarbon subsidiary reported a 41.7% yoy revenue growth to Rs2,207cr. For the first time in last few quarters, this vertical reported positive EBIT of Rs40cr vs loss of Rs942cr in 1QFY2015. Key Positives: Turnaround in Hydrocarbon seg.; positive Management commentary on the award outlook front; net WC cycle almost maintained on qoq basis. Key Negatives: Miss on order inflow and revenue guidance. Outlook and valuation: L&T’s diversified presence, and an anticipated recovery in the capex cycle coupled with the company’s strong balance sheet comfort us that it is well positioned to benefit from revival in the award activity environment. With order backlog expected to grow, execution should pick-up gradually. We have valued the company using the sum-of-the-parts (SoTP) methodology, to capture the value of all its businesses and investments. Ascribing separate values to its parent business (on a P/E basis) and investments in subsidiaries (using P/E, P/BV and M-cap basis), we arrive at FY2017E based target price of Rs2,013. We are of the view that L&T is a good proxy play for investors wanting to ride on the revival of the Indian infrastructure growth story. Given 12.5% upside potential in the stock from current levels, we maintain Accumulate rating on the stock.

Source: http://www.angelbroking.com/