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India Equity Research Reports, IPO and Stock News
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Orderflow surprise
L&T’s recurring 4QFY11 EPS rose 11%YoY to Rs24.8 – 6% below expectations due
to Rs2bn in warranty provisions, Rs1bn MTM fx provisions and higher depreciation.
Core performance was inline with L&T ending FY11 with 19% topline growth and
+10bps E&C margins. 4Q E&C order flows were exceptionally strong at Rs285bn
taking FY11 E&C inflows to Rs730bn (+14%yoY, -10% ex internal orders). With
management guiding for 15-20% growth in orders for FY12 led by a rebound in
hydrocarbons and momentum in infra, L&T’s valuation premium could sustain. We
are cutting FY12-13 EPS estimates and our target by 7-12% but maintain O-PF.
Core metrics inline for 4QFY11; recurring EPS up 11%YoY
L&T’s 4Q standalone revenues rose 13%YoY to Rs154bn – 1% below estimate due to
lower than expected E&C revenues (Rs135bn, +13%YoY). Ebitda (Rs24bn, +19%YoY)
was inline despite Rs2bn in provisions for warranties on the large DMRC project. Rs1bn
in MTM provisions on currency swaps and higher depreciation (lower useful life
estimate) meant that recurring EPS (Rs24.8, +11%YoY) came 6% below estimates.
FY11 performance creditable; exceptionally strong 4Q orders
Full year topline rose 19%YoY – broadly inline with management guidance (~-20%)
along with creditable E&C margins (13.7%, +10bps). Recurring standalone earnings
rose 16%YoY to Rs60.7/sh. Incredibly, 4Q E&C orders (Rs285bn, +29%YoY) came in at
an all time high; L&T had made only Rs11bn in order announcements in 4Q but tallied
off Rs178bn in new orders in the analyst meet and explained that the bulk of the
residual ~Rs107bn was from the infra sectors, especially in buildings and factories.
FY11 E&C orderflows +14%YoY; -10%YoY ex of L&T internal projects
L&T ended the year with Rs730bn (+14%YoY) in E&C orders, therefore, despite the fall
in public sector orders (-49% YoY). Ex of internal orders (Rs175bn boosted by Rs59bn
Hyderabad metro, Rs9bn Seawoods in 4Q), inflows fell 10%YoY. Nonetheless, this is
creditable given L&T’s high base and the overall lull in ordering activity in 2HFY11.
FY12 guidance: +25% on topline, -50bps on margins, +15-20% on orders
L&T has guided for a stiff 15-20% orderflow growth in FY12 led by a rebound in
hydrocarbons (India, MENA), momentum in infra (roads, airports, buildings, ports) and
process (steel, fertilisers); it is also cautiously optimistic on power (BOP, construction,
T&D). Rs40-50bn for the Hyd-metro and Rs25bn for an NHAI contract will also be
booked in FY12. It also guides for 25% topline growth (fed from Rs1.3trn backlog), a
50-75bps cut in margins (inflation, competition) and a 3-4ppt rise in working capital.
Premium to peers to sustain, maintain O-PF
We are cutting FY12-13 EPS by 7-12% to factor in lower profits from subsidiaries
(which disappointed in FY11); we also lower our target to Rs1,800/sh. However, with
L&T broadly meeting its guidance metrics in the last five years, management’s
guidance of a 15-20% rise in orders in FY12 will sustain its valuation premium. OPF.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Orderflow surprise
L&T’s recurring 4QFY11 EPS rose 11%YoY to Rs24.8 – 6% below expectations due
to Rs2bn in warranty provisions, Rs1bn MTM fx provisions and higher depreciation.
Core performance was inline with L&T ending FY11 with 19% topline growth and
+10bps E&C margins. 4Q E&C order flows were exceptionally strong at Rs285bn
taking FY11 E&C inflows to Rs730bn (+14%yoY, -10% ex internal orders). With
management guiding for 15-20% growth in orders for FY12 led by a rebound in
hydrocarbons and momentum in infra, L&T’s valuation premium could sustain. We
are cutting FY12-13 EPS estimates and our target by 7-12% but maintain O-PF.
Core metrics inline for 4QFY11; recurring EPS up 11%YoY
L&T’s 4Q standalone revenues rose 13%YoY to Rs154bn – 1% below estimate due to
lower than expected E&C revenues (Rs135bn, +13%YoY). Ebitda (Rs24bn, +19%YoY)
was inline despite Rs2bn in provisions for warranties on the large DMRC project. Rs1bn
in MTM provisions on currency swaps and higher depreciation (lower useful life
estimate) meant that recurring EPS (Rs24.8, +11%YoY) came 6% below estimates.
FY11 performance creditable; exceptionally strong 4Q orders
Full year topline rose 19%YoY – broadly inline with management guidance (~-20%)
along with creditable E&C margins (13.7%, +10bps). Recurring standalone earnings
rose 16%YoY to Rs60.7/sh. Incredibly, 4Q E&C orders (Rs285bn, +29%YoY) came in at
an all time high; L&T had made only Rs11bn in order announcements in 4Q but tallied
off Rs178bn in new orders in the analyst meet and explained that the bulk of the
residual ~Rs107bn was from the infra sectors, especially in buildings and factories.
FY11 E&C orderflows +14%YoY; -10%YoY ex of L&T internal projects
L&T ended the year with Rs730bn (+14%YoY) in E&C orders, therefore, despite the fall
in public sector orders (-49% YoY). Ex of internal orders (Rs175bn boosted by Rs59bn
Hyderabad metro, Rs9bn Seawoods in 4Q), inflows fell 10%YoY. Nonetheless, this is
creditable given L&T’s high base and the overall lull in ordering activity in 2HFY11.
FY12 guidance: +25% on topline, -50bps on margins, +15-20% on orders
L&T has guided for a stiff 15-20% orderflow growth in FY12 led by a rebound in
hydrocarbons (India, MENA), momentum in infra (roads, airports, buildings, ports) and
process (steel, fertilisers); it is also cautiously optimistic on power (BOP, construction,
T&D). Rs40-50bn for the Hyd-metro and Rs25bn for an NHAI contract will also be
booked in FY12. It also guides for 25% topline growth (fed from Rs1.3trn backlog), a
50-75bps cut in margins (inflation, competition) and a 3-4ppt rise in working capital.
Premium to peers to sustain, maintain O-PF
We are cutting FY12-13 EPS by 7-12% to factor in lower profits from subsidiaries
(which disappointed in FY11); we also lower our target to Rs1,800/sh. However, with
L&T broadly meeting its guidance metrics in the last five years, management’s
guidance of a 15-20% rise in orders in FY12 will sustain its valuation premium. OPF.
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