Anand Rathi
L&T (Buy)
CMP: ₹1,499
Target: ₹1,820
Hydrocarbon — key growth area: Despite infra being the largest segment for L&T, hydrocarbon related order book — both domestic and orders from the West Asia — are growing fast which provides revenue and order book visibility.
Margin expansion likely: The changing order book composition, especially the increase in share of the higher margin domestic orders are likely to improve margin for the company.
Meeting guidance: We expect the company to meet the management targets on sales growth and margin.
We initiate coverage on L&T with Buy rating and target price of ₹1,820 based on SOTP valuations.
Risks: Lack of pick-up in capex cycle, subdued global oil & gas capex, lower than expected order inflows and drag on profitability.