L&T - Overseas juggernaut: 1.5-2% market share in ME - Motilal Oswal

Circumspect about nature of project wins, near-term margins at risk

- Since our thematic report on Larsen and Toubro (LT), 'Gearing up the overseas juggernaut' in November 2012, the overseas business is now expected to contribute 39% of consolidated earnings in FY14E (v/s 32% earlier).

- Initial success has been encouraging, with LT being part of the pre-qualified bidding consortiums in metro, railway, road and hydrocarbon projects. Possible order intake of INR200b in FY14E from the overseas markets will entail a market share of ~1.5-2% in Middle East ordering (based on recent aggregate ordering trends).

- We remain circumspect about profitability in overseas orders due to likely poor fixed cost absorption and learning curve, associated with new geographies/ segments.

- Maintain Buy and believe triggers still exist to accumulate the stock on declines.

Source : Equity Bulls

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