Maintain Buy on L&T - Motilal Oswal

THE INSITES: Larsen & Toubro

Preparing for next phase of growth - Visit to L&T's Hazira manufacturing and fabrication facilities

Mr Ravi Uppal, CEO of L&T Power, sees strong demand for power equipment, backed by aggressive power generation capacity additions.

L&T's BTG facility is India's largest single-location integrated manufacturing plant. We were impressed with the facilities.

The Heavy Engineering Systems division makes static products for core sectors. The business has design and quality specifications of various agencies.

Lack of decision making by the government and an uncertain policy environment are impacting infrastructure spending and hence L&T's order intake.

L&T's order backlog is worth Rs1,148b (up 26% YoY), implying BTB ratio of 2.7x TTM. 9MFY11 order intake was Rs495b, up 8% YoY.

We expect L&T (LT IN; Mkt Cap USD20.9b, CMP Rs1,568, Buy) to post consolidated earnings CAGR of 20% over FY11-13. However, slower growth in order-intake in FY12 can impact FY13 revenue growth (current estimate 21%). Our target price is Rs1,905 on an SOTP basis, with target multiple for L&T standalone at 22x FY12E EPS. Maintain Buy.

Source : Equity Bulls

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