L&T (BUY): Disappointing numbers but strong outlook - Ambit

L&T's 4QFY13 operating results were disappointing given the sharp decline in EBITDA margins (180bps YoY) and significantly higher interest expenses. However, a guidance beating order booking growth of 25% and L&T's ability to further gain market shares in a gradually improving environment can lead to revenue growth accelerating in FY14 to ~17% (upper end of management guidance) from 14% in FY13. We expect marginal 20bps decline in the EBITDA margins to 10.9% for FY14 as we believe that India will account for a larger share of overall revenues given strong order inflows in FY13 (up 26%). Lower interest expenses on account of lower debt, relatively better cash flow generation (already visible in FY13 compared to FY12) and controlled capex/ investments will restrict the required downgrades to PAT on account of revenue and EBITDA downgrades; we expect to downgrade our last published FY14 estimates for EBITDA (Rs78.6bn) and core eps (Rs75) by 4-7%. We retain our BUY stance and expect our TP of Rs1,715 (incl. embedded value of Rs433) to see 5-7% reduction. Whilst change in macro environment will be external trigger, stable to strong RoIC and asset monetization can be catalysts.

Source : Equity Bulls

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