Larsen & Toubro - 4QFY2015 Result Update - Angel Broking

Standalone numbers disappoint: For 4QFY2015, Larsen & Toubro (L&T) reported a decline of 5.5% yoy in its standalone top-line to Rs. 18,968cr, reflecting lower revenue booking across Power, Metallurgical & Material Handling (MMH), Heavy Engineering (HE) and Others segments. EBITDA margin for the quarter was down 132bp yoy to 13.1%, on account of surge in SGA expenses. Reported PAT declined by 24.3% yoy to Rs. 2,061cr, owing to higher depreciation and interest expenses.

Order inflow for the consolidated entity increased by 39.1% yoy during the quarter to Rs. 47,582cr; the total consol. order inflow for FY2015 stood at Rs. 1,55,367cr (up 22% yoy). L&T's order backlog stands at Rs. 2,32,649cr, thereby giving revenue visibility for over the next 30 months.

Hydro-carbon continues to be in red: In 4QFY2015, the Hydrocarbon subsidiary reported an 1% yoy revenue growth to Rs. 2,200cr. During the quarter, this vertical reported a negative 6.8% EBITDA margin vs negative 5.4% in 4QFY2014.

Key Positives: Strong order book growth in FY2015; positive Management commentary on the award outlook front; easing of net WC cycle on qoq basis.

Key Negatives: Miss on revenue guidance; continued losses at Hydro-Carbons business.

Outlook and valuation: L&T's diversified presence, and an anticipated recovery in the capex cycle coupled with the company's strong balance sheet comfort us. L&T is well positioned to benefit from a revival in the award activity environment. With order backlog expected to grow, execution should pick-up from here-on. We have valued the company using sum-of-the-parts (SOTP) methodology, to capture the value of all its businesses and investments. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries (using P/E, P/BV and M-cap basis), we arrive at a FY2017E based target price of Rs. 2,013. We are of the view that L&T is a good proxy play for investors wanting to ride on the revival of the Indian infrastructure growth story. Given the 18.2% upside potential in the stock from the current levels, we maintain our Buy rating on the stock.

Shares of LARSEN & TOUBRO LTD. was last trading in BSE at Rs.1682.3 as compared to the previous close of Rs. 1660.95. The total number of shares traded during the day was 145950 in over 8269 trades.

The stock hit an intraday high of Rs. 1701.25 and intraday low of 1657. The net turnover during the day was Rs. 245836499.

Source : Equity Bulls

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