HDFC Securities' research report on Larsen and Toubro
Larsen & Toubro (LT) reported Q4FY23 revenue/EBITDA/APAT at INR 583.4/68.3/39.9bn, in line/(missing) with our estimates by 0.1/(8.4)/(7.5)% respectively. EBITDA margin: 11.7% (-65/+78bps YoY/QoQ) vs. our estimate of 12.8%. The margin was impacted largely by higher input prices in projects and manufacturing portfolio. The Hyderabad metro saw ridership improving to 408k per day from 394k per day in Q3FY23. The consolidated net D/E stood at 0.81x as of Mar’23, similar to the Dec’22 level. The FY23 NWC to sales ratio (exoff financial services business) was at a five-year low level of 16.1%. Given: (1) the record-high order book (OB) of INR 4tn and order inflows (OI) of INR 2.3tn; (2) bottoming out of infra margins; (3) improvement in subsidiary performance; (4) improvement in net working capital levels; and (5) pick-up in private and public capex in coming years, we have increased the standalone multiple to 24x, from 23x.
Outlook
We maintain a BUY on the stock with an increased TP of INR 2,724/sh (24x core Mar-25 EPS).
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