Larsen & Toubro - Result Update - Kotak

L&T came out with numbers that were ahead of expectations on the revenue and profit front. While the project execution was robust, lower tax and reduced sales and administration expenses helped the company to deliver higher profits.

- In line with our expectations, the company missed out on its order intake guidance in FY12. Surprisingly, the company has guided for 15-20% growth in order intake FY13, aggressive in our view.

- Revenue growth guidance of 15-20% in FY13 and stable EBITDA margin guidance with variation of +/- 50 bps.

- On a FY13 basis, L&T is trading at 13.7x and 12.4x PE and EV/EBITDA respectively. The stock has corrected 9% since our previous update. In view of this, we upgrade the stock to BUY. However, note that near-term outlook for the capital goods sector remains clouded due to sluggish industrial and infrastructure growth. There is also lack of any near-term trigger for the stock.

- Risks - Weak capex cycle and policy bottlenecks coupled with rising capital engagement in business.

Source : Equity Bulls

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