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Decent operational performance amid unlock…..

About the stock: Larsen & Toubro (L&T) is India’s largest engineering & construction (E&C) company with interest in EPC projects, hi-tech manufacturing and services.

* It primarily operates in infrastructure, heavy engineering, defence engineering, power, hydrocarbon, services business segments

* Infrastructure segment contributes ~45% to consolidated revenue followed by services (~30%)

Q2FY22 Results: L&T reported decent Q2FY22 results.

* Adjusted standalone revenue was up 8% YoY to | 17061 crore on low base.

* Standalone EBITDA was up 14% YoY to | 1402.8 crore with margins improving 40 bps to 8.2% on a YoY basis

* Consequently, standalone adjusted PAT at | 1758.2 crore (up 67.2% YoY)

* Order inflows came in at | 42140 crore, up 50% YoY

What should investors do? L&T’s strong order book of | 330541 crore suggest good revenue visibility in coming years.

* We maintain our BUY rating on the stock

Target Price and Valuation: We value L&T at | 2150 on SoTP basis

Key triggers for future price performance:

* Low to mid teen revenue and order inflow growth in FY22E amid challenges

* Net working capital to sale expected to remain stable at ~22.3% for FY22E

* Focus on asset monetisation to further strengthen the balance sheet and improve return ratios

* Strong b/s, controlled working capital, & strong cash generation

Alternate Stock Idea: Apart from L&T, in our coverage we also like Siemens Ltd.

* Further penetration of valued added automation and digitisation products & services across segments to drive margins, long term growth

* BUY with target price of | 2550

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