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India Equity Research Reports, IPO and Stock News
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Proxy to India's infra story: We believe L&T is in an enviable
position, given the apparent shortage of good-quality constructors
in India. The company is in a position to choose its contracts
and negotiate for price variation clauses. L&T's strong balance
sheet, a sound execution engine, wide array of capabilities,
integrated operations tailored to suit India's infrastructure growth
story and multiple, recurring value-unlocking triggers over the
medium term lead us to place faith in this default infrastructure
growth story of India. L&T has an order book of >`1.3trn, lending
revenue visibility. With signs of pick-up in execution, management
has guided for an improving scenario, and we also believe that
most of the pieces are falling in place for the company.
Well-capitalised balance sheet: L&T has a well-capitalised
balance sheet, at a debt-equity ratio of 0.3x as of FY2011, in
spite of having a strong portfolio of assets and having invested
in future growth areas. We believe the key factors for the same
are 1) high margins and 2) better working capital management.
Outlook and valuation - Negatives priced in: We believe after
its fall from peaks of `2,200 levels, L&T stock is trading at
attractive levels. While the absolute PE might look rich, it is well
deserved in our opinion, with L&T being the largest and most
diversified play in our India construction universe. At the CMP of
`1,706, the stock is trading at 20.6x FY2013E earnings and
3.5x FY2013E P/BV on a standalone basis. We have used the
SOTP methodology to value the company to capture all its
business initiatives and investments/stakes in different 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 fair value works out to `2,033, which provides 19.2% upside
from current levels. Hence, we recommend Buy on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Proxy to India's infra story: We believe L&T is in an enviable
position, given the apparent shortage of good-quality constructors
in India. The company is in a position to choose its contracts
and negotiate for price variation clauses. L&T's strong balance
sheet, a sound execution engine, wide array of capabilities,
integrated operations tailored to suit India's infrastructure growth
story and multiple, recurring value-unlocking triggers over the
medium term lead us to place faith in this default infrastructure
growth story of India. L&T has an order book of >`1.3trn, lending
revenue visibility. With signs of pick-up in execution, management
has guided for an improving scenario, and we also believe that
most of the pieces are falling in place for the company.
Well-capitalised balance sheet: L&T has a well-capitalised
balance sheet, at a debt-equity ratio of 0.3x as of FY2011, in
spite of having a strong portfolio of assets and having invested
in future growth areas. We believe the key factors for the same
are 1) high margins and 2) better working capital management.
Outlook and valuation - Negatives priced in: We believe after
its fall from peaks of `2,200 levels, L&T stock is trading at
attractive levels. While the absolute PE might look rich, it is well
deserved in our opinion, with L&T being the largest and most
diversified play in our India construction universe. At the CMP of
`1,706, the stock is trading at 20.6x FY2013E earnings and
3.5x FY2013E P/BV on a standalone basis. We have used the
SOTP methodology to value the company to capture all its
business initiatives and investments/stakes in different 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 fair value works out to `2,033, which provides 19.2% upside
from current levels. Hence, we recommend Buy on the stock.
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