We retain BUY on Larsen & Toubro (LT) with in-line revenues and PAT beating our estimates. LT maintained its growth/order inflow guidance driven by robust 1HFY20 inflows and a large bid pipeline. Our SOTP of Rs 1,703 (vs Rs 1,720 earlier) is based on 22x Mar-21E EPS. Tax re-calibration has resulted in FY20/21E EPS upgrade by 8.5/11%.
The company indicated of opportunity pipeline of Rs5.2 trn and maintained order inflow/revenue growth/EBITDA margin (ex-services) guidance at 10-12%/12-15%/10-10.5% for FY20. The company continues to focus on its strategic plan of achieving profitable growth and improving RoE to 18% by FY21. We maintain our BUY recommendation on L&T on the back of its strong business model with robust order book, diverse skill sets, strong execution capabilities and increased focus on improving return ratios by exiting non-core assets. We maintain BUY with revised SOTP based TP of Rs1800 (Rs1767) on account of addition of Mindtree valuation.
Valuation - Maintain Buy with a unchanged PT of Rs. 1,765: L&T’s strong order backlog along with its presence across verticals and geographies in itscore E&C business has lend support in healthy order inflow during H1FY2020 (despite lull in the industry). The incumbent government’s sustained efforts inreviving spending on infrastructure and private industrial capex bodes wellfor L&T in terms of order inflows in the medium to long term. Additionally, L&T has benefited from its geographical diversification especially during the time period when the domestic environment remained muted. We have fine tuned our estimates for FY2020-FY2021. We maintain our Buy rating on the stockwith an unchanged SOTP-based price target (PT) of Rs. 1,765.
While the recent acquisition of Mindtree could pave the way for consolidation of IT services under L&T’s umbrella over the long run, we believe its core E&C business (currently at a cyclically low OPM and peak working capital level) is poised to improve reasonably over two–three years. Maintain ‘BUY/SO’. Gradual industrial pickup remains a key monitorable.
L&T has delivered yet another resilient quarterly performance with earnings growth of ~31% yoy amid challenging environment. Order inflow grew 20% yoy to Rs482bn driven by core international orders (+77% yoy to Rs108bn), hydrocarbon (+269% yoy to Rs149bn) & power (+212% yoy to Rs43bn). L&T has maintained its execution and inflow guidance at 12-15% and 10-12% for FY20. An order backlog worth Rs3trn (2.3x TTM sales) and healthy pipeline worth ~Rs5tn in H2FY20 will help maintain L&T’s execution momentum through the near-term uncertainties around weak macro, fiscal deficit and liquidity challenges. Order book diversification ,global competence, technology BSE code: 500510 FII +DII 57.9% differentiation, proven track record and cost efficiencies bode well in this regard. We broadly retain our estimates & BUY rating with SOTP based price target of Rs1,655.
L&T has consistently been delivering in terms of bagging orders, strong order execution, though with some temporary concerns on working capital management owing to tight liquidity scenario. Given the strong backlog, L&T is well placed to deliver 12.6% revenue CAGR (Ex-E&A business) and 15.7% PAT CAGR on a standalone basis over FY19-21E which is likely to improve return ratios. We value L&T on SoTP (with base business at 20x FY21E EPS) with a target price of rs 1740 and maintain BUY on L&T.
Govt. announced significant push in infra and sub-sectors including roads, railways, port, airports, and urban infrastructure. The capex outlook for these segments remain strong for the next 3-5 years. With 16% market share in the last five years, L&T has been able to maintain leadership position in the infra space. Apart from infra, Hydrocarbon order inflows in FY19 has been strong and therefore expected to show major contribution in FY20 and FY21. We reiterate BUY on Larsen & Toubro India with a target price of Rs. 1,487
Any announcement to increase payout by dividends or buyback may be a re-rating catalyst for the stock. At CMP, the stock trades at FY20/FY21E P/E multiple of 18x/15x for core E&C business, which is at discount to its long-term trading average multiple of 23x. L&T is our top pick in the capital goods space. We maintain our Buy rating with unchanged TP of INR1,800.
L&T’s Q1 FY20 sales grew 10% y/y. Its EBITDA margin expanded 100bps to 11.2%. Adj. PAT grew 21% y/y to `13.6bn. Despite sluggish capex investment, order inflows grew 11% y/y to `387bn. Working capital deteriorated 200bps largely helping vendor liquidity. We believe that the forthcoming capex in select private sectors and in the Railways will lead to healthy inflows for the company. Adjusting for its discontinued operations, we reduce our FY20e and FY21e earnings respectively 4% and 6%. Considering the strong prospects, we maintain a Buy, with a revised TP of `1,720 (a sum-of-parts valuation, based on FY21).
Valuation and view: We cut our core E&C EPS estimate by 7%/5% for FY20/21 on account of lower EBITDA margin assumption and reduced other income in the light of the MindTree acquisition. Consolidated EPS cut is limited to 2%/1.6%. We include MindTree stake in our SOTP valuation (20% discount to current market cap, in line with our methodology for other listed subsidiaries). We continue valuing LT’s core E&C business at FY21E target multiple of 22x. Accounting for the current market price of listed subsidiaries, our TP stands at INR1,790 (prior: INR1,850). Maintain Buy.
Valuation & Outlook: L&T has consistently been delivering in terms of bagging orders, strong order execution, though with some temporary concerns on working capital management owing to tight liquidity scenario. However, we believe revenue, PAT CAGR of 12.2%, 12.6% in FY19-21, respectively, coupled with improvement in return ratios should be value accretive for the stock. We value L&T on SoTP (with base business at 20x FY21E EPS) with a target price of | 1675 and maintain BUY on L&T.
L&T has consistently been delivering in terms of bagging orders, strong order execution, though with some temporary concerns on working capital management owing to tight liquidity scenario. However, we believe revenue, PAT CAGR of 12.2%, 12.6% in FY19-21, respectively, coupled with improvement in return ratios should be value accretive for the stock. We value L&T on SoTP (with base business at 20x FY21E EPS) with a target price of | 1675 and maintain BUY on L&T.
We maintain our BUY recommendation on L&T on the back of its strong business model with robust order book, diverse skill sets, strong execution capabilities and increased focus on improving return ratios by exiting non- core assets.The company continues to focus on its strategic plan of achieving profitable growth and improving RoE in medium term. We maintain BUY with revised SOTP based TP of Rs1710 (Rs1744) on account of change in listed services entities.
Maintain Buy with a revised PT of Rs. 1,765: L&T posted in- line results for Q1FY2020, showing healthy execution and improvement in OPM on a y-o-y basis. Further, L&T’s strong order backlog and healthy bidding pipeline provide comfort on achieving a 14% CAGR in consolidated net earnings over FY2019-FY2020. Despite inorganic acquisition, L&T’s consolidated gross debt/equity is expected to remain at manageable level of ~2x. We believe L&T, being a quasi-domesticinfrastructure play, is expected to benefit over the next five years, asthe incumbent government envisages Rs. 100 lakh crore investments ininfrastructure till 2024. We have fine tuned our estimates for FY2020-FY2021, factoring Mindtree’s acquisition from Q2FY2020 along withrevised valuation for its listed financial subsidiaries. Hence, we maintainour Buy rating on the stock with a revised SOTP-based price target (PT) of Rs. 1,765.
The Q1FY20 was a better-than-expected quarter operationally and the marginal drop in infrastructure margins were due to project mix. The company has retained its guidance for FY20, in terms of inflows, revenues, and margins, while the upwards RoE trajectory continues. It remains the best proxy for the capex story. We continue to maintain our Buy, with an unchanged TP of Rs 1600 based on SOTP.
Revenues in FY19 have clocked in at Rs 141,007 crore registering a resurgent growth of 18% over FY18. PAT touched an all-time high of Rs 8,905 crore in FY19 representing a substantial growth of 21% over FY18. Margins stood at 12.5% against 13.3 % in the year-ago period and were dragged down by decline in Infra segment margins to 8.5%. Infrastructure margin was impacted due to increase in commodity prices, job mix and one time provisions. We expect margins to normalize led by signs of capex revival in H2FY20. L&T has maintained its revenue growth and order inflow guidance at 12-15% and 10-12% for FY20.We maintain a BUY with a target of Rs. 1,553
Maintain Buy with a revised PT of Rs. 1,820: L&T re-jigged its investments by taking impairment in key subsidiaries, stake divestmentof financial subsidiaries, transfer of road assets in InvIT and acquisition of Mindtree. Further, fructification of sale of the electrical and automation business worth Rs. 14,000 crore would materially improve its liquidity and cash surplus. We believe L&T, being a quasi-domestic infrastructure play, is expected to benefit over the next five years, as the incumbent governmentenvisages Rs. 100 lakh crore investments in infrastructure till 2024. Weexpect L&T to be a key beneficiary from the expected big-ticket size project awards domestically. Further, L&T’s geographical diversificationwould aid it to reduce its risk from volatility in crude prices. Hence, at this stage, we maintain our Buy rating on the stock with an unchanged SOTP- based price target (PT) of Rs. 1,820.
The company is on track to achieve its 5-year plan (RoE improved from 12.5% in FY17 to 15.3% in FY19) and remains confident on achieving its goal (RoE 18%) by FY21. Further, L&T is developing its next strategic idea (to launch by FY22) and has already announced aggressive plans on digitalization (L&T- NxT) across products and project business. The company has guided a revenue growth of 12-15%, EBITDA margin (ex-services) of 10.5% and expects similar numbers in FY21E. We maintain BUY with revised SOTP based TP of Rs1744 per share.
The company’s order inflow and revenue guidance for FY20 was strong, and we believe the improving margins and robust order book of Rs 2.9trn give us clear visibility of achieving the revenue growth and target RoEs. We continue to maintain a Buy rating for the stock, with a TP of Rs 1600.
L&T maintained its revenue growth and order inflow guidance at 12-15% and 10-12% for FY20. The momentum set on infrastructure building, coupled with incremental tax revenues, the emphasis on investments in areas such as airports, railroads, water supply and distribution, expressway programs, power availability, Oil & Gas production and mass rapid transit system is expected to continue. Further revival of stressed businesses and recovery of NPAs are expected to ease the concerns on liquidity and perk-up the business sentiment. Improved credit growth is also expected to aid an uptick in private capex in areas of transportation infrastructure, green energy, commercial real estate, digital technology & services. We maintain a BUY with a target of Rs. 1,498.
We have marginally increased our FY19/20 sales/EBDITA/PAT estimates by 4%/6%/6% and believe LT is the best way to play across the capex cycles in India. We maintain Buy with an unchanged TP of Rs 1600.
L&T has consistently been delivering in terms of bagging orders, strong order execution while, at the same time, strong cash flows from operations and efficient working capital management are aiding to improve quality of its balance sheet. We believe revenue, PAT CAGR of 11.9%, 12.7% in FY19- 21, respectively, coupled with improvement in return ratios should be value accretive for the stock. We value L&T on SoTP (with base business at 20x FY21E EPS) with a revised target price of | 1680 and maintain BUY on L&T.
We recommend a BUY on Larsen & Toubro (LT) with SoTP of Rs 1,794/sh. Reduction in subsidiaries losses, majorly provided transportation project overruns, order pick up in Domestic/International markets and strong cash flow make L&T an anchor play on infra investment and capex recovery. Higher services share in the mix will improve RoEs further. Working capital is at optimal levels. A tight lid on asset capex will only help further re-rating.
The overall order inflow for FY19 was up 16% YoY with domestic order inflow up 11% YoY and international up 30% YoY. NWC reduced by 200bps YoY at 18% in FY19 over FY18 and management has to remain between 15-18% going ahead. RoE at the end of FY19 came in at 15.3% compared to 14.1% in FY18. The company has guided for revenue growth of 12-15%, EBITDA margin (ex-services) 10.5% and similar number in FY21. Order inflow guidance of 10-12% which will be mainly driven by Infrastructure and Hydrocarbon mainly in the overseas markets. It expects strong ordering momentum to start from 2QFY20 onwards. The company continues to focus on its strategic plan of achieving profitable growth and improving RoE in medium term. We maintain BUY with revised SOTP based TP of Rs1744 per share.
We raise our FY20 earnings estimate by 7% to factor in strong order backlog-led revenue growth. Our TP now increases to INR1,850. Adjusted for valuation of the services business, the core E&C business is available at FY20E/21E P/E of 18x/15x. Maintain Buy.
Maintain Buy with unchanged PT of Rs. 1,655: Management reiterates its order inflow and topline guidance of 10-12%/12-15%, respectively, with stable margin on a consolidated level. However, there is scope of margin improvement through better operating margin in the infra segment (FY2019 net profit was affected due to Rs 300 crore provisioning in the infra segment). Based on continued strong growth momentum in subsidiaries and improved outlook on standalone basis, we maintain our Buy rating with an unchanged price target (PT) of Rs. 1,655.
MTCL acquisition may be marginally EPS accretive and neutral from the valuation perspective. However, it is too early to incorporate the same in our estimates as it may be a long-drawn process. For now, we maintain our Buy rating and target price of INR1,610.