Larsen & Toubro (LT)
Industrials
So far so good. While L&T inches closer to Rs200 bn inflows/quarter run-rate in 2Q also,
note that 45% of this was from real estate with attendant concentration risks. Several
headwinds remain pertinent to (1) replacing in-house inflows (15% of total) with reluctance
to commit fresh capital, (2) sweet spot in real estate has helped but PSU/Govt tendering
(about 50%) is quite competitive with L&T win rate being quite low (0-35%, 5-7 bidders),
(3) valuations at 15.5X one-year forward P/E (adjusted standalone) seem full considering
slower earnings growth (10-14% vs 30% CAGR till FY2012). Retain REDUCE (TP: Rs1,515).
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily05102012oo.pdf
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily05102012oo.pdf
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