India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Larsen & Toubro -The infra giant…
• Proxy play on India Infrastructure story
• It is the most diversified engineering & infrastructure developer in
the country with a presence across all segments of infrastructure
i.e. power, roads, hydrocarbons & process industries
• It is also planning to scale up in niche areas like defence, nuclear
power and shipbuilding, which have the potential to add
significantly to overall revenues in the next three to five years
• L&T also has other subsidiaries that are present in IT (L&T
Infotech) and financial services (L&T Capital and L&T Finance)
• Over the last couple of years, L&T has added capacities to meet
increasing volumes. For instance, the company had added 5000
MW of power equipment facility, the heavy engineering facility in
Oman was commissioned in FY10 while it is still adding capacities
mainly in the shipping & port and defence sector to meet future
needs
• With rising GDP growth over FY01-FY11, L&T has seen revenue
and PAT scale up by 5.3x and 12.1x over the last decade
�� Going ahead
• Increasing participation from private sector players in the XIIth
Plan (50%) and 4.5x increase in plan expenditure on the
infrastructure sector in the XIIth Plan over the Xth Plan will
provide humongous opportunities to L&T in terms of driving base
business growth and scaling up new initiatives like power,
shipping, nuclear power and defence
• Rise in ordering activity in the power sector (expected ordering
opportunity over FY12-FY17 at | 10-12 trillion), road sector (7000
km of ordering over FY12-FY15), scaling up of orders in process
industries will lead to a sizeable scale up in order backlog for L&T
over the next three to five years
• Revenue growth as percentage of GDP growth has averaged at
2.8x while order inflow growth as a percentage of GDP growth
has averaged at 3.8x over FY06-FY11. If maintained/declines
marginally, it will help L&T to reasonably grow its revenues at
20% CAGR over five years
• Going ahead, we believe value unlocking by divesting stakes in its
core subsidiaries like L&T Finance Holdings, L&T Infotech and L&T
IDPL will lead to huge value creation for L&T’s shareholders
Valuation
L&T is the best way to play the infrastructure story in the next five years. It
has a diversified business model in terms of different verticals of the
sector, good mix of domestic and international business, better execution
capability & technology tie ups and healthy balance sheet to capitalise on
opportunities that will come across in next five years.
No comments:
Post a Comment