L&T (BUY): Similar disappointment, similar cuts - Ambit

L&T's 1QFY14 results were no different than its last few results—strong inflows, deficient execution, lower EBITDA margins but a steady guidance. Market share gains were better than our expectations, but declining execution in India (down 9% YoY), a much sharper-than-expected drop in EBITDA margins (to 9.4% vs est 10.3%) and deteriorating working capital cycle are forcing another round of cuts to our estimates (10% cut to FY14 EPS estimate and 4% cut to FY15 EPS). We also cut our core business valuation by 9% to Rs781 (13.0x FY15 core EPS of Rs53). The Infrastructure segment, which accounts for 42% of total revenues, recorded revenue growth of 23% YoY, EBITDA margins of 11.8%, and a book-to-bill of 3.8x. Continuing order inflows in infra segment, support our revenue growth (of 12%) and margins (of 10.5%) estimates in FY14. EBITDA margins should find stability after the declining share of overseas revenues from hereon. We retain our BUY stance but cut our target price to Rs1,071 (embedded value of Rs290).

Source : Equity Bulls

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