Views on Larsen & Toubro 2QFY2016 Results: Angel Broking

Views of Mr. Santosh Yellapu (Sr. Research Analyst - Infrastructure, Angel Broking) on Larsen & Toubro 2QFY2016 Results:

2QFY2016 Numbers disappoint, Maintain BUY on the stock

"Larsen & Toubro (L&T; standalone entity) reported a poor set of numbers for 2QFY2016, both at the top-line and the bottom-line level. The company reported a lower-than-expected top-line growth, i.e. of 4.1% YoY to INR 13,234cr. The subtle revenue growth is owing to lower revenue booking across Infrastructure, Metallurgical & Material Handling and Heavy Engineering segments. The disappointment continued further towards the EBITDA level; the company reported a 290bp YoY decline in the EBITDA margin to 7.6%. Revenue de-growth and 56.5% YoY increase in sales, administration and other expenses led to EBITDA margin compression. During the quarter, L&T reported a gain from stake sale in a subsidiary and an associate company to the tune of INR 546cr. Adjusting for the same, the Adj. PAT of the company came in at INR 643cr (lower than our estimate of INR 1,084cr). The Adj. PAT was impacted due to increase in interest expenses by 22.7% YoY.

For 2QFY2016, L&T reported order inflows of INR 28,620cr. Due to lower order inflows in two consecutive quarters (1QFY2016 & 2QFY2016), the Management has revised down its order inflow guidance for FY2016E to 5-7% (from 15% earlier).

Even though there have been delays on the awarding front, we believe in the Indian Infra growth story. Given the company's market positioning, we see L&T to be well positioned to gain from an expected gradual recovery in the capex cycle, given its exposure to a range of sectors, and better cash flow generating potential vis-a-vis its peers. We maintain our positive view on L&T; we maintain our BUY rating on the stock."

Shares of LARSEN & TOUBRO LTD. was last trading in BSE at Rs.1411.15 as compared to the previous close of Rs. 1471.6. The total number of shares traded during the day was 1028765 in over 41101 trades.

The stock hit an intraday high of Rs. 1498 and intraday low of 1400. The net turnover during the day was Rs. 1484039483.

Source : Equity Bulls

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