Maintain Buy on L&T - Emkay

Q4FY11 performance meets expectations – APAT up 9% yoy to Rs14.6 bn. Stable EBITDA margins at 15.2% - positive surprise.

Clocks order inflows at Rs304 bn, against all Odds and positive surprise– but misses target; Order book at Rs1.3 tn (3X sales) – sets tone for continued momentum in FY12E.

Upbeat management guidance for FY12E à Order inflow growth at 15-20% (pick-up in Hydrocarbons, Process), Revenue growth at 25%; Pressure on EBITDA mgn (50-75 bps).

Maintain FY12E earnings of Rs82.1. Attractive valuations at 19.4X FY12E. Retain BUY with price target of Rs2015 (SoTP)

Q4FY11 performance meets expectations – APAT up 9% yoy to Rs14.6 bn

L&T reported healthy net profit growth at 9% yoy – meets our expectations . This was attributed to (1) 13% yoy growth in revenue Rs153.8 bn – led by E&C segment (up 13% yoy to Rs136.6 bn) and M&IP segment (up 27% yoy to Rs8.7 bn) (2) Stable operating margins at 15.2% (up 10 bps yoy), versus our expectation of 140 bps yoy decline – positive surprise. Also, operational performance had benefit from changes in depreciation and amortization policy on few assets, hitherto expensed with. (3) EBITDA growth at 14% yoy to Rs23.4 bn – ahead of estimates. However, 103% yoy increase in depreciation partly offset gains in operational performance – hence; net profit growth was 9% yoy to Rs14.6 bn – meets estimates.

Maintain FY12E earnings of Rs82.1, Reiterate BUY

We maintain our FY12E earnings of Rs82.1 per share in view of upbeat guidance shared by L&T. We introduce FY13E earnings of Rs100.6/Share. At CMP, the stock is trading attractively at 19.4X FY12E consolidated earnings. With robust order backlog and strong order inflows until May 2011, L&T remains on strong footing. Most likely, L&T would retain the growth momentum in FY12E – in Order Inflows, led by good order pipeline in Infrastructure, Hydrocarbons, Power and Process and Revenue Booking – led by strong order backlog. We retain our BUY rating with price target of Rs2015.

Source : Equity Bulls

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