Larsen & Toubro announces order wins of Rs120 bn in Q1FY12- Emkay

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Larsen & Toubro announces order wins of Rs120 bn in Q1FY12- Quite remarkable considering tough and challenging business environment

Total order wins of Rs120 bn announced so far

For Q1FY12, order wins by L&T is quite remarkable considering the tough and challenging business environment. The total order wins announced so far is Rs120 bn, which does not include the balance portion of Hyderabad Metro Rail. The order wins are from diverse sectors like Oil N Gas, Power, Roads, Metal and Process Industries. The key order wins in Q1FY12 totaling Rs120 bn is listed below.

16052011 -  'L&T bags Gas Based Power Plant EPC Order from PPN Power for Rs35 bn'.

18052011 -  'L&T wins Rs. 14.5 bn GSPC Contract for Offshore Process Platform in KG Basin'.

21062011 -  'L&T Bags Rs. 13.7 bn Electrical Orders from Gulf for Major Transmission & Substation Projects'.

22062011 -  'L&T bags New Orders worth Rs. 41.0 bn in Buildings & Factories IC'

24062011 -  'L&T bags new orders worth Rs. 16.1 bn in Metallurgical and Material Handling IC'.

Factoring unannounced order wins and remaining portfion of Hyderabad Metro, total order wins would be Rs170 bn to Rs210 bn

Typically, L&T does not announce small or insignifant order wins and restricts to large and critical order wins. Historically, order wins remaining unnannouned totals Rs50-60 bn for the quarter and Rs150 bn on annual basis. Hence, factoring similar unannounced order wins and inclusion of part portion of Hyderabad Metro (remaining portion after adjusting for Rs60 bn factored in FY11, Metro Coaches and Interest Capitalization), total order wins is expected to be Rs170 bn (excluding Hyderabad Metro) and Rs210 bn (including Hyderabad Metro).

So far achieved desired run-rate to meet FY12E order inflow target of Rs920 bn

It is evident that, L&T would report order inflow growth of 9%-35% in Q1FY12 on yoy basis - on worst-best case basis. Considering FY12E target order inflow of Rs920 bn, order wins in Q1FY12 are quite satisfactory being approximately 18%-23% of the FY12E order inflows and in-line with the desired run-rate. 

Any Earnings and/or Ratings remain back-ended, Remain Positive with target price of Rs2015/Share

Impending risk of negative surprise and deviation from management guidance (on order inflows- important Catalyst) remains addressed on temporary basis. Hence, any Earnings and/or Ratings changes remains back-ended towards Q4FY12E, since the Q1FY12 progress remains satisfactory and raises confidence of investors. Other catalysts like unlocking value of L&T Finance through IPO is yet to play out.  Thus, L&T is best placed to remain Market Outperformer in medium term with price target of Rs2015/Share.