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Core execution ramping up

Our view

L&T reported decent set of numbers led by pick‐up in execution in its core infra segment, owing to improved work force availability and supply chain issues normalizing. Segment such as Infrastructure (up 14% YoY), Power (up 22% YoY) and IT&TS (up 29% YoY) reported strong revenue growth. During 4Q, company recorded healthy OI of Rs739bn, up 46% YoY led by large order wins in Infra and Hydrocarbon segment in the domestic market and sizeable export orders. Order Book stands at all‐ time high of Rs3.6trn (2.3x TTM revenues) providing a strong revenue visibility for next 2‐3 years. Management indicated that order pipeline stands healthy at ~Rs8.6trn with good traction witnessed in sectors such as Metros/RRTS/HSR, Roads and Expressways, Water, Renewables and Power T&D. On global front, with pickup in economic activity in GCC and African region management is witnessing good traction in order inflows.

We believe that L&T is well‐ placed to emerge stronger given its financial, technical & managerial capability for sustaining and gaining market share. At CMP, the stock is currently trading at 20.0x/16.4x FY23E/24E earnings. Given strong business model, robust bid pipeline, diversified order book and healthy balance sheet we maintain our BUY rating with a revised SOTP‐based TP of Rs2,075. TP has been reduced downward mainly on account of downward revision of Target Mcap of its subsidiaries.

Result Highlights

* Consolidated sales came in at ~Rs528.5bn (up 10% YoY; YSL estimate of ~Rs550bn) driven by revenue growth across segments such as Infrastructure (up 14% YoY), Power (up 22% YoY), and IT&TS (up 29% YoY)  

* EBITDA came in at Rs65.2bn, missing our estimate (YSLe ~Rs88.2bn) with EBITDA margins coming in at 12.3%.   

* PBT came in at Rs55.6bn, mainly led by decline in interest cost (down ~17% YoY). Depreciation was down 5.8% YoY while other income declined 49.9% YoY.

* During the quarter, Adj. PAT grew 21.7% to Rs36.2bn.

* Order inflows grew by 46% YoY to Rs739.4bn in 4QFY22 driven by order wins in Metro, Water, Residential, T&D, Defence Engineering and Hydrocarbon verticals. International orders constituted 44% of total OI.

* Order book stands strong at ~Rs3.6trn, up 9.2% YoY as on 4QFY22.

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