Larsen & Toubro - 4QFY2012 Result Update - Angel Broking

Larsen and Toubro (L&T) posted a good set of numbers for 4QFY2012, which were broadly in-line with our expectations; however, the company disappointed on the order inflow front. As of 4QFY2012, L&T's order backlog stands at Rs.1,45,723cr, 11.0% yoy growth. Order inflow for the quarter declined by 30.2% to Rs.21,159cr, taking the order inflow for FY2012 to Rs.70,574cr (down 12% yoy). We prefer L&T over its peers, as it is a market leader and fundamentally the strongest infrastructure company. We maintain L&T as our top pick in the sector and, hence, continue to recommend Buy on the stock.

Performance in-line with estimates: On the top-line front, L&T reported decent top-line growth of 20.0% yoy to Rs.18,461cr, marginally below our estimate of Rs.18,945cr. On the EBITDA front, performance was as per our expectations, with the company reporting a yoy dip of 130bp to 13.9% against our expectation of 13.7%. On the bottom-line front, L&T reported 13.9% yoy growth to Rs.1,920cr, marginally higher than our estimate of Rs.1,862cr, owing to exceptional gain (Rs.55cr) and lower tax rate (26.9%).

Outlook and valuation: For FY2013, management has given a guidance of 15-20% growth for both revenue and order inflow. We believe although the company can achieve this guidance on the revenue front, given its robust order backlog, it would be difficult to achieve 15-20% growth on the order inflow front, considering the challenging macro environment and hence are factoring order inflow growth of 10.6% for FY2013. We believe L&T is best placed to benefit from the gradual recovery in capex cycle, given its diverse exposure to sectors, strong balance sheet and cash flow generation as compared to peers.

We maintain L&T as our top pick in the sector and maintain our Buy rating on the stock with a target price of Rs.1,553.

Source : Equity Bulls

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