Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    
Google
Web www.equitybulls.com
Research

| More

Buyback Offer: Larsen & Toubro Ltd - BUY - Buyback Price Rs.1500

Posted On: 2018-08-25 09:46:36

L&T's buyback announcement is in line with the company's endeavor to enhance its Return of Equity. We see the buyback as a positive signal regarding the current valuations and the future outlook.

L&T Buyback Details

- In the board meeting held on 23rd Aug 2018, L&T has announced further details of its buyback programme.
- It will buy back upto 60 mn shares i.e. upto 4.3% of the paid-up equity capital.
- The buyback is proposed to be made under the tender offer route.
- The company has announced buyback price of upto Rs 1,500/share, ~21% and 11% premium to the closing price of the day of buyback announcement and yesterday's close respectively.

- The buyback would entail an outlay of Rs 90 bn, which is 18% of the standalone net worth. Since the outlay is more than 10%, the company would need to shareholder approval for buyback.

- As of March 2018, on standalone basis, the company had a gross debt of Rs 105.6 bn and cash and treasury investment of Rs 53.8 bn. Thus, the debt equity ratio stands at 0.1x. Hence, the buyback programme would result in an increase in debt/equity ratio to 0.3x, which in our view is manageable. Further, the company should be able to generate free cash of ~ Rs 40-45 bn in FY19E, which will further mitigate impact on balance sheet.

- We expect minor drop of 3.3% in EPS in FY20E due to the buyback.
- On the positive side, the buyback should potentially improve the ROE by 90 bps in FY20E.

Rationale for Buyback - While the buyback has a dilutive effect on earnings per share, we believe it makes sense on account of

- We expect the buyback to enhance ROE of the company. It will enable the company to move closer to the target ROE of 18% by 2021.

- Sizeable capacity in most manufacturing verticals amid tepid demand conditions leading to modest capex needs in the medium term

- In the recent years, the company's focus has been on monetizing its various investments viz Dhamra Port, Kattupalli Port and REITs.

Recommend BUY: On forward earnings basis, L&T is trading at 22.2x and 19.4x FY19E and FY20E earnings respectively.

- In the recent quarters, the company has demonstrated good traction on the execution front.
- In terms of order intake, the company has started on a good note in the current fiscal.
- We remain positive on the company's endeavor on improving its ROE through divestments and limiting its role as a EPC contractor.
- We maintain our target price of Rs 1520 (unchanged) on the stock, valuing it at 21x FY20 earnings. Due to adequate upside, we upgrade rating to "BUY".

Shares of LARSEN & TOUBRO LTD. was last trading in BSE at Rs.1342.8 as compared to the previous close of Rs. 1352.5. The total number of shares traded during the day was 306642 in over 10260 trades.

The stock hit an intraday high of Rs. 1363.6 and intraday low of 1341. The net turnover during the day was Rs. 414910736.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

KILPEST India Ltd Q2 consolidated net profit higher at Rs. 1.53 crore

VIMTA Labs Ltd H1FY19 net profit surges to Rs. 13.42 crores

Result Update: Central Depository Services (India) Ltd - BUY - TP Rs.290 - Kotak

Result Update: Blue Star Ltd - BUY - TP Rs.655 - Kotak

Result Update: Bluedart Express Ltd - ACCUMULATE - TP Rs.2875 - Kotak

Result Update: Mahindra Holidays & Resorts Ltd - BUY - TP Rs.315 - Kotak

Result Update: GHCL - BUY - TP Rs.270 - Kotak

Result Update: NIIT Ltd - BUY - TP Rs.110 - Kotak

Result Update: Quess Corp Ltd - BUY - TP Rs.1072 - Kotak

Result Update: Praj Industries Ltd - REDUCE - TP Rs.108 - Kotak

Result Update: Supreme Industries Ltd - BUY - TP Rs.1205 - Kotak

Granules India Ltd Q2 consolidated PAT climbs to Rs. 60.26 crores

Result Update: Kansai Nerolac Paints Ltd - BUY - TP Rs.485 - Kotak

Result Update: Zensar Technologies Ltd - ACCUMULATE - TP Rs.257 - Kotak

Bajaj Auto Ltd - OPM below estimate; Retain Accumulate - Emkay

Result Update: Bodal Chemicals Ltd - ACCUMULATE - TP Rs.130 - Kotak

Result Update: Kajaria Ceramics Ltd - BUY - TP Rs.500 - Kotak

Result Update: Persistent Systems Ltd - BUY - TP Rs.870 - Kotak

Auto Industry Volume Update: September 2018 - Kotak

Sector Update - Natural Gas - Kotak

Company Visit Note: Jindal Stainless Ltd - NOT RATED - Kotak

Company Update: Bajaj Electricals Ltd - ACCUMULATE - TP Rs.545 - Kotak

Telecom: 2QFY19 preview - no respite - Kotak

Sector Update: Natural Gas - Kotak

Company Update: NBCC (India) Ltd - BUY - TP Rs.95 - Kotak

Sector Update: Paper Industry - Kotak

Management Meet Update: Maharashtra Seamless Ltd - BUY - TP Rs.805 - Kotak

Mid-Year FY19 Bank Outlook: Stress in Non-Corporate Segments - India Ratings and Research

View on proposed banks merger

Company Update: GHCL - BUY - TP Rs.330 - Kotak

Company Update: MIRC Electronics Ltd - BUY - TP Rs.32 - Kotak

Company Visit Note: Finolex Industries Ltd - ACCUMULATE - TP Rs.671 - Kotak

Company Update: NMDC Ltd - BUY - TP Rs.125 - Kotak

Company Update: Allcargo Logistics Ltd - BUY - TP Rs.145 - Kotak

Company Update: Hindustan Zinc Ltd - ACCUMULATE - TP Rs.300

Result Update: Vascon Engineers Ltd - BUY - TP Rs.48 - Kotak

Result Update: Voltamp Ltd - BUY - TP Rs.1320 - Kotak

Result Update: Bodal Chemicals Ltd - REDUCE - TP Rs.130 - Kotak

Result Update: MIRC Electronics Ltd - ACCUMULATE - TP Rs.32 - Kotak

Result Update: Shankara Building Products Ltd - BUY - TP Rs.2017 - Kotak

Result Update: Dilip Buildcon Ltd - BUY - TP Rs.1276 - Kotak

Result Update: Zensar Technologies Ltd - ACCUMULATE - TP Rs.1373 - Kotak

Result Update: The India Cements Ltd - REDUCE - TP Rs.112 - Kotak

Result Update: Nagarjuna Construction Co Ltd - BUY - TP Rs.151 - Kotak

Result Update: Berger Paints Ltd - SELL - TP Rs.305 - Kotak

Result Update: Allcargo Logistics Ltd - BUY - TP Rs.145 - Kotak

Result Update: Aksharchem (India) Ltd - REDUCE - TP Rs.533 - Kotak

Result Update: AIA Engineering Ltd - SELL - TP Rs.1700 - Kotak

Result Update: Cummins India Ltd - BUY - TP Rs.785 - Kotak

Result Update: Dollar Industries Ltd - BUY - TP Rs.427 - Kotak







Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2018