Geojit BNP Paribas

L&T (Buy)

CMP: ₹1,487

Target: ₹1,629

L&T is an engineering and construction (E&C) conglomerate. Further, it has presence in IT & financial services sectors.

Key takeaways: a) Amid challenging business conditions, consolidated sales/ adjusted PAT increased by 1.4/39 per cent on y-o-y basis in Q3FY17.

b) L&T reported 10 per cent y-o-y decline in Q3 order intake due to muted domestic capex and delay in awards.

c) EBITDA margin rose 140 bps y-o-y to 9.6 per cent as margin improvement was witnessed in infra, heavy engineering and hydrocarbon businesses.

d) We reduce our FY17/FY18 revenue estimates by 2.4/1.1 per cent as execution in domestic business remains subdued.

e) Strong order book, improvement in net working capital (NWC) and L&T’s efforts to unlock value from investments gives us confidence to maintain positive stance on the stock.

f) We value L&T on SOTP basis with target price of ₹1,629 ascribing ₹1,294 to the core E&C business and ₹335 to the subsidiary portfolio.