L&T - Q1FY13 Result Update - Kotak

L&T came out with numbers that were ahead of expectations on the revenue and profit front. Reported EBITDA margins were sharply lower bearing the brunt of forex loss of Rs 2.6 bn. The forex hit was offset by commensurate rise in other income from subsidiaries.

- Core EBITDA margins (excluding forex hit on borrowings) stand at 10.4% vs 11.9%.

- Order intake was robust on the face of it but unimpressive excluding spillover projects from previous fiscal.

- Management commentary on business environment continues to be lackluster with continued project deferrals in key verticals.

- Given that the first quarter had the benefit of spill-over orders of previous fiscal, order announcements needs to be monitored in the current quarter to get a sense of sustainable order intake.

- The stock has corrected 4% from its recent high of Rs 1430. In view of this, we upgrade the stock to ACCUMULATE. Recommend investors to buy the stock on declines.

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

Source : Equity Bulls

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