Buy Larsen & Toubro Ltd For Target Rs.1,643 - Yes Securities
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Result Highlights
* Revenues grew 9% yoy to Rs480.9 bn (est. Rs462.4bn) as execution moved towards the pre‐COVID levels.
* Order inflow stood at Rs506.5bn, down 12% yoy
* Consolidated Order Book stands at Rs3.27 trn with international order book constituting 21% of the total.
* EBITDA came in at Rs63.9bn, up 25% yoy with EBITDA margins as 13.3% (+170 bps yoy)
* Infra EBIT margins was stable yoy at 10.6%
* Adjusted PAT came in at Rs34.2bn, up 12% yoy due to higher tax outgo.
* The company has declared the dividend of Rs.18/share
Our view:
L&T has reported healthy operational performance despite COVID‐19 situation. The Core EBITDA margins stood at 12.8%, up 60 bps yoy driven by healthy execution in Q4. The management is confident of achieving the stable margin of 10‐ 10.5% for FY22 while order inflow to grow at low to mid‐teens. Segments like hydrocarbon, defence, and water segment are growing well in India. Further, the Infrastructure segment should benefit from the higher infra allocation in the budget.
We believe that the diversified orderbook, strong execution capabilities across geographies, competent workforce, thrust on technology along with international presence and proven track record works in favor of the company. We remain optimistic over the medium to long term growth. We maintain our BUY rating on the stock for revised target price of Rs.1,643 (based on SOTP valuation). We value the core business at 13x EV/EBITDA and listed subsidiaries at current market value adjusted for holding company discount.
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