L&T - 1QFY2013 Result Update - Angel Broking

Larsen and Toubro (L&T) posted mixed set of numbers for 1QFY2013, with robust growth on the revenue front but fall in EBITDA margin (owing to forex MTM provisioning). Despite drop in margins, earnings growth was higher-than-expected owing to huge surge in other income. As of 1QFY2013, L&T's order backlog stands at Rs.1,53,095cr, 12.4% yoy growth. Order inflow for the quarter jumped by 21.0% to Rs.19,594cr, which was aided by FY2012 spill over orders (Rs.7,748cr).

Drop in margins offset by higher other income: L&T reported strong top-line growth of 26.1% yoy to Rs.11,955cr, owing to on time execution which was ~8% higher than our and street estimate. Segment wise E&C segment reported 29.5% yoy growth however MIP and E&E segments' performance was muted. On the EBITDA front, company reported a yoy dip of 280bp to 9.1% against our expectations of 11.7% due to MTM forex loss of Rs.267cr. Adjusting for the ~Rs.160cr MTM forex loss which pertains to loans, EBITDA margins would have stood at 10.4%. PAT grew by 15.7% to Rs.864cr higher than our estimate of Rs.819cr owing to huge surge in other income. Other income for the quarter came in at Rs.606cr led by higher dividend from subsidiaries.

Outlook and valuation: For FY2013, the management has reiterated its guidance of 15-20% growth for both revenue and order inflow and +/- 50bp on EBITDA margin. Revenue guidance looks achievable given its robust order book (2.5x FY2013E revenue) but order inflow look aggressive considering the challenging macro environment and hence we 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 and strong balance sheet. We recommend Accumulate rating on the stock with a target price of Rs.1,553.

Source : Equity Bulls

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