Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Larsen & Toubro
Overweight
LART.BO, LT IN
Strong orders, targets could set the tone for better
times
• L&T surprised markets by reporting record quarterly orders of
Rs303B at the group level at its results yesterday: 4Q numbers
themselves fell shy of expectations (adjusted PAT growth of 8%, 10%
below estimates), but management served another ace by providing strong
growth targets of 20-25% (revenue), and 15-20% (orders) for FY12. Finally,
the company dispelled uncertainties on FY12 costing and margins by
quantifying the drop upfront at 50-75bps.
• On the back of these, L&T rallied 6% yesterday, after a one-month
underperforming streak. In our view, continued momentum in the
investment cycle is key to L&T’s sustained rally. Key issues of concern
include: 1) quality of record orders reported at the 12th hour; and 2) extent
of confidence on L&T meeting its new targets for FY12.
• Surprise orders helped L&T notch up its highest-ever quarterly order
intake: Besides known orders like Hyderabad Metro (Rs59B), PPN gas
turbine (Rs35B), GSPC offshore platform (Rs14.5B), L&T has received a
Rs58B order for 3.1mtpa steel plant and some orders in buildings and real
estate. In both cases, L&T did not disclose client details due to contractual
restrictions, but assured analysts that orders are genuine and of good quality.
With these, L&T has managed 15% order inflow growth in FY11, taking
OB at Rs1.3trillion.
• With strong orders, skepticism on FY12 growth is lessened: In the
analyst meet, CMD Naik provided a good bottom-up perspective on 15%
order growth target (Rs917B) for FY12, which seems predicated on revival
of hydrocarbon and process ordering, coupled with continued infrastructure
projects. Management also tried to assuage fears on major balance sheet
commitments toward growing its OB, by citing efforts to exit and reduce
stakes in development projects at the right valuation.
• We maintain our Mar-12 SOP-based PT of Rs2100, taking 22%
standalone revenue growth, 50bps E&C margin decline and 17% standalone
PAT growth for FY12. At 16.2x FY13E consolidated EPS, we think L&T is
not expensive by historical standards, and a favourable capex cycle would
enable the stock to maintain its premium to E&C peers.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Larsen & Toubro
Overweight
LART.BO, LT IN
Strong orders, targets could set the tone for better
times
• L&T surprised markets by reporting record quarterly orders of
Rs303B at the group level at its results yesterday: 4Q numbers
themselves fell shy of expectations (adjusted PAT growth of 8%, 10%
below estimates), but management served another ace by providing strong
growth targets of 20-25% (revenue), and 15-20% (orders) for FY12. Finally,
the company dispelled uncertainties on FY12 costing and margins by
quantifying the drop upfront at 50-75bps.
• On the back of these, L&T rallied 6% yesterday, after a one-month
underperforming streak. In our view, continued momentum in the
investment cycle is key to L&T’s sustained rally. Key issues of concern
include: 1) quality of record orders reported at the 12th hour; and 2) extent
of confidence on L&T meeting its new targets for FY12.
• Surprise orders helped L&T notch up its highest-ever quarterly order
intake: Besides known orders like Hyderabad Metro (Rs59B), PPN gas
turbine (Rs35B), GSPC offshore platform (Rs14.5B), L&T has received a
Rs58B order for 3.1mtpa steel plant and some orders in buildings and real
estate. In both cases, L&T did not disclose client details due to contractual
restrictions, but assured analysts that orders are genuine and of good quality.
With these, L&T has managed 15% order inflow growth in FY11, taking
OB at Rs1.3trillion.
• With strong orders, skepticism on FY12 growth is lessened: In the
analyst meet, CMD Naik provided a good bottom-up perspective on 15%
order growth target (Rs917B) for FY12, which seems predicated on revival
of hydrocarbon and process ordering, coupled with continued infrastructure
projects. Management also tried to assuage fears on major balance sheet
commitments toward growing its OB, by citing efforts to exit and reduce
stakes in development projects at the right valuation.
• We maintain our Mar-12 SOP-based PT of Rs2100, taking 22%
standalone revenue growth, 50bps E&C margin decline and 17% standalone
PAT growth for FY12. At 16.2x FY13E consolidated EPS, we think L&T is
not expensive by historical standards, and a favourable capex cycle would
enable the stock to maintain its premium to E&C peers.
No comments:
Post a Comment