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Research
Larsen & Toubro - 4QFY12 Results Update - Motilal Oswal
Posted On : 2012-05-16 11:15:23( TIMEZONE : IST )
- 4QFY12 operational performance in line: Larsen and Toubro (LT) reported revenue growth of 21% YoY and EBITDA growth of 9% YoY for 4QFY12, largely in line with our estimates. PAT grew 22% YoY, higher than our estimate, supported by higher other income, lower interest and lower tax rates.
- Missed FY12 order intake guidance; EBITDA margin in line: In 4QFY12, order intake was INR212b, down 30% YoY. In FY12, order intake was INR706b, down 12%; the management had guided 5% growth. LT is seeing meaningful increase in order contribution from the Infrastructure segment while the share of Oil & Gas has declined significantly in the last two years. The contribution from overseas orders has also increased meaningfully. In FY12, E&C margins declined 95bp to 12.7% v/s management guidance of 75-125bp decline.
- Management guidance for FY13 a positive surprise: The management has guided 15-20% growth in order intake and revenue for FY13, and EBITDA margin within 50bp of FY12 level. Order intake of INR805b-840b in FY13 will be supported by INR120b-150b of project deferments in FY12, increase in contribution of international markets from 18% in FY12 to 25%, steady contribution of ~20% from the Buildings & Factories, Oil & Gas and Process Industries.
- Standalone profit to remain flat YoY; manufacturing JVs to impact consolidated profit: We expect standalone EPS (net of dividend from subsidiaries) to remain flat at INR67/INR68 for FY13/14 v/s INR67 in FY12. Revenue would grow at a CAGR of 10% while EBITDA margin would decline by 72bp over FY12-14. We estimate consolidated EPS at INR87 (+12%, upgrade of 5%) for FY13 and at INR89 (+2%, downgrade of 4%) for FY14. There exist headwinds to consolidated numbers, given poor business visibility for manufacturing JVs like Power BTG, Shipbuilding and Forgings, and investment in BOT projects. Our estimates do not fully capture the possible impact of capacity under-utilization in the initial periods. Maintain Buy with an SOTP-based target price of INR1,417. We value LT standalone at 14x FY14E earnings and subsidiaries at INR428/share.
