L&T - 2QFY2013 Result Update - Angel Broking

Larsen and Toubro (L&T) posted a good set of numbers for 2QFY2013, which were above our as well as street's expectation, mainly on account of a robust top-line growth and higher divestment gains. As of 2QFY2013, L&T's order backlog stands at Rs.1,58,528cr, indicating a growth of 11.5% yoy. Order inflow for the quarter jumped by 30.3% to Rs.20,967cr mainly driven by major orders bagged in the Infrastructure and hydrocarbon segment.

Strong performance: L&T reported a strong top-line growth of 17.3% yoy to Rs.13,195cr, above our estimate of 12.3% growth, mainly on account of pick up in execution in the engineering and construction (E&C) segment. Segment wise, the E&C segment reported a 20% yoy growth; however the machinery and industrial products (MIP) and electrical and electronics (E&E) segments' performance was muted. On the EBITDA front, the company reported an EBITDA of Rs.1,406cr, indicating a growth of 19.8% yoy. EBITDAM came in at 10.7%, an increase of 22bp yoy, and was below our estimate of 11.4%. PAT grew by 42.6% yoy to Rs.1,138cr owing to strong execution and huge surge in exceptional item arising out of divestment gains.

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 margins. We believe given its robust order backlog, healthy order inflows during the past few quarters and strong execution capabilities the company is well placed to achieve its guidance on both- order inflow and revenue front. We believe L&T is best placed to benefit from a gradual recovery in the capex cycle, given its diverse exposure to sectors and a strong balance sheet. We maintain our Accumulate rating on the stock with a target price of Rs.1,748.

Source : Equity Bulls

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