Dalal Street Investments
Top

Larsen & Toubro – Results Review

January 18, 2011

Larsen & Toubro’s (L&T) Q3FY11 PAT, at Rs 8.1 bn, driven by strong execution in the E&C segment. Robust revenue growth of 41% YoY reinforces confidence in execution of strong order book of Rs 1,149 bn. Margins have dipped YoY by 150 bps to 10.8%, but this is more a qtly fluctuation than a trend. While revenue guidance has been maintained (20% YoY growth in FY11E), mgmt has highlighted that order flow guidance (25% YoY growth) could be at risk due to deferment of orders to FY12E.

L&T removed order for IT parks of ~Rs20bn from Godrej & Arun Excello on lack of progress. Led by delay of orders from power (captive orders – Karnataka JV, NTPC), roads (mega roads), Oil & Gas and Infra space like urban infra (Hyd. Metro), high-rise buildings etc… we think L&T is set miss its 25%YoY inflow guidance. However, L&T’s book to bill at 3x (Q2 FY11) has the ability to support 2-3 quarters of order inflow volatility. Hence a revival during FY12 (except in Real Estate) in most laggard sectors (delays were primarily due to technical / policy issues) coupled with contribution from in-house projects (Metro and Roads) should improve the business outlook for L&T.

L&T IT PAT was flat at Rs730mn on 217bps decline in PAT margin.

L&T is expected to report an EPS between Rs 72 to Rs 84 with Sum of the Parts Valuation for Stock Price target between Rs1,900 to Rs 2300.

Comments

Got something to say?






Bottom