2QFY2012 Result Update | Infrastructure October 22, 2011
CMP Target Price
Performance Highlights
`1,336 `1,714
Investment Period Op. profit
1,174
1,006
1,126
16.7
4.2
12 Months
Stock Info Infrastructure
Source: Company, Angel Research
Sector Market Cap (` cr)
Larsen and Toubro (L&T) posted good set of numbers for 2QFY2012, which were above our expectations mainly on account of top-line growth. As of 2QFY2012, L&T has an order backlog of `1,42,185cr. Order inflow for the quarter declined by 21.3% to `16,096cr (`20,464cr). Management has significantly cut its order inflow guidance from 15-20% to 5% for FY2012, mainly to factor in the general slowdown faced by the sector, but it has maintained revenue growth guidance of 25% for the whole year, which we believe is aggressive.
Beta
81,650 1.1
52 Week High / Low
2,212/1,304
Avg. Daily Volume
274,018
Face Value (`)
2
BSE Sensex
16,786
Nifty
5,050
Reuters Code
LART.BO LT@IN
Bloomberg Code
Shareholding Pattern (%)
L&T reported decent top-line growth of 20.5% yoy to `11,245cr (`9,331cr), above our estimates of 12.8% growth, mainly on account of pick-up in the E&C segment.
Promoters
On the EBITDA front, performance was below our expectations mainly on account of higher-than-anticipated staff cost and material cost. L&T reported higher than anticipated other income, owing to higher income on its investments. Therefore, the bottom line came in at `798.4cr (8.2% above our estimates).
IndianPublic/Others
We believe L&T is best placed to benefit from the gradual recovery in the capex cycle, given its diverse exposure to sectors, strong balance sheet and cash flow generation as compared to peers.
0.0
MF/Banks/IndianFls
42.9
FII/NRIs/OCBs
Abs.(%) Sensex LNT
21.1 36.0
3m
1yr
3yr
(9.0) (17.2)
57.1
(25.4) (34.5)
55.2
We have revised downwards our estimates for FY2013 and assigned a lower PE multiple of 18x (earlier 19x) to L&T parent’s FY2013E EPS of`74.0 and its subsidiaries to factor in macro headwinds faced by the sector and economy.
% chg
9.2
18.6
21.9
16.9
% chg
11.5
15.5
18.3
15.2
EBITDA margin (%)
12.9
12.9
11.9
12.0
P/E (x)
28.4
24.6
20.8
18.1
RoAE (%)
18.8
16.6
16.9
16.9
RoACE (%) P/BV (x)
19.7 4.5
18.5 3.7
17.8 3.3
18.0 2.8
EV/Sales (x) EV/EBITDA (x)
2.4
2.0
1.7
1.5
18.3
15.5
14.1
12.2
Source: Company, Angel Research
Please refer to important disclosures at the end of this report
022-39357800 Ext: 6829
[email protected]
022-39357800 Ext: 6842
[email protected]
1
Larsen & Toubro | 2QFY2012 Result Update
Exhibit 1: Quarterly performance (Standalone)
Total Expenditure
21.0
10,071
8,325
8,356
OPM (%)
10.4
10.8
11.9
Interest
197
193
161
2.0
Depreciation
171
121
168
41.0
Non Operating Income
274
279
240
(1.8)
89
174
56
371
379
Extraordinary/Dividend from Subs Tax PAT (%) Reported EPS PAT (%) Adj.
(40)bp
(150)bp
18,427 20.5
15,203
18.9
11.1
11.7
(60)bp
22.2 358
335
30.5
339 1.8
235
44.5
14.2
514
456
15.2
(48.8)
58.9
145
224
(133.7)
347
(2.2)
6.8
718
690
12.4
7.1
8.2
7.9
(110)bp
(80)bp
7.5
8.3
(80)bp
13.0
23.9
12.1
(45.7)
7.0
25.1
73.8
(12.3)
6.6
7.0
7.3
(40)bp
(70)bp
6.9
7.4
(50)bp
Source: Company, Angel Research
Exhibit 2: 2QFY2012 Actual vs. estimates Net sales
10,524
11,245
6.9
OPM (%)
10.8
10.4
(36)bp
738.1
798.4
8.2
PAT
Adj.
Source: Company, Angel Research
Top line above our estimates due to strong execution L&T reported decent top-line growth of 20.5% yoy to `11,245cr (`9,331cr), above our estimates of 12.8% growth, mainly on account of pick-up in the E&C segment, which recorded 21.3% top-line growth to`9,721cr (`8,015cr). Management has given a guidance of 25% revenue growth for the year and maintains the same as of now, despite numerous headwinds faced by the sector. This guidance implies a run rate of ~28% in the second half of the fiscal, which looks steep especially considering the recent turn of world events. Hence, we believe the company might lower its guidance during the course of the year. However, given the robust order book and excellent execution capabilities at the disposal of the company, we expect L&T to post revenue growth of ~22%, which would be higher than most of its peers.
Order inflow guidance reduced to 5%; implying 18% growth in 2HFY2012 – Looks aggressive Order inflow during 2QFY2012 stood at`16,096, down 21.3% yoy. Management highlighted that order inflows were affected by delays in the tendering process (such as environmental approvals and land acquisition), challenging business outlook with slowdown in capex activity and political issues, in-line with other industry peers. The company is witnessing good traction on the international front (hydrocarbon and T&D space) and sees a huge pipeline. Management has
October 22, 2011
2
Larsen & Toubro | 2QFY2012 Result Update
reduced its order inflow guidance to 5% from 15-20% earlier, which implies a run rate of 17.9% yoy growth in 2HFY2012, which looks steep considering the macro environment. We pencil in flat order inflow ( `79,809cr) in FY2012E, which implies yoy order inflow growth of 8.8% in 2HFY2012E.
Exhibit 3: Stable execution expected going ahead 18,000 16,000 14,000
40.0
25.3
12,000 10,000
17.8 7.3
6,000 4,000
20.5 20.3 13.2
6.4
3.0
139.5
35,000
28.1
8,000
Exhibit 4: Order inflow witnessing a downward spiral 50.0
40.5
39.8 35.0
(5.7)
25,000 30.0 20.0
20,000
10.0
10,000
-
2,000 0
65.2
15,000
14.3
5,000 -
(10.0) 9 0 Y F Q 2
9 0 Y F Q 3
9 0 Y F Q 4
0 1 Y F Q 1
0 1 Y F Q 2
0 1 Y F Q 3
0 1 Y F Q 4
Sales(` cr,LHS)
1 1 Y F Q 1
1 1 Y F Q 2
1 1 Y F Q 3
1 1 Y F Q 4
2 1 Y F Q 1
160.0 140.0 120.0 100.0 63.3 80.0 47.5 60.0 27.1 23.4 11.4 40.0 3.6 20.0 (16.9) (21.3) (21.8) (24.9) (20.0) (40.0)
30,000
2 1 Y F Q 2
9 0 Y F
9 0 Y F
9 0 Y F
0 1 Y F
0 1 Y F
0 1 Y F
0 1 Y F
1 1 Y F
Q 2
Q 3
Q 4
Q 1
Q 2
Q 3
Q 4
Q 1
Order Booking (` cr, LHS)
Growth (yoy %,R HS)
Source: Company, Angel Research
1 1 Y F Q 2
1 1 Y F Q 3
1 1 Y F Q 4
2 1 Y F Q 1
2 1 Y F Q 2
Growth (yoy %, RHS)
Source: Company, Angel Research
EBITDA margin posts a decline, marginally below our estimates; L&T guidance for higher margin compression On the EBITDA front, performance was below our expectations mainly on account of higher-than-anticipated staff cost – owing to increased employee base and annual salary revision and higher material cost. Therefore, the company reported EBITDAM of 10.4% against our expectation of 10.8%. Going ahead, we believe margins would continue to reel under pressure, given the change in order book mix towards infrastructure projects (which yields lower margins compared to the other segments), enhanced competition witnessed in all segments with no respite in sight and fluctuations in commodity prices – all this has been subscribed by the management as well. Therefore, management has guided that margin may be lower by 75-125bp for the year, higher than its earlier guidance of 50-75bp. It should be noted that we have already factored in 100bp lower margins for the next two years.
Exhibit 5: Margins slightly under pressure... 15.0
2,500
15.1 11.2 10.6
2,000
12.3
Exhibit 6: ...but still posting healthy PATM
15.2 12.8 10.810.8
11.9 10.4
8.8 9.1 1,500 1,000 500
16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 -
0 9 0 Y F Q 2
9 0 Y F Q 3
9 0 Y F Q 4
0 1 Y F Q 1
0 1 Y F Q 2
0 1 Y F Q 3
EBITDA(`c r,LHS)
Source: Company, Angel Research
October 22, 2011
0 1 Y F Q 4
1 1 Y F Q 1
1 1 Y F Q 2
1 1 Y F Q 3
1 1 Y F Q 4
2 1 Y F Q 1
EBITDAM(%,RHS)
2 1 Y F Q 2
1,800 1,600 1,400 1,200 1,000 800 600 400 200 0
10.4
10.0
8.8 7.6 6.0
7.0
12.0
10.0
10.0
8.0
7.6
7.3
7.0 7.0
6.6
8.0 6.0 4.0 2.0 -
9 0 Y F Q 2
9 0 Y F Q 3
9 0 Y F Q 4
0 1 Y F Q 1
0 1 Y F Q 2
0 1 Y F Q 3
Adj. PAT ( ` cr, LHS)
0 1 Y F Q 4
1 1 Y F Q 1
1 1 Y F Q 2
1 1 Y F Q 3
1 1 Y F Q 4
2 1 Y F Q 1
2 1 Y F Q 2
PATM (%,RHS)
Source: Company, Angel Research
3
Larsen & Toubro | 2QFY2012 Result Update
Segmental performance The E&C segment, which contributed ~85% to the company’s revenue, witnessed good traction and recorded growth of 21.3% yoy for the quarter to `9,721cr (`8,015cr), primarily on account of strong execution of its order book. On the margin front, the segment faced severe pressures and witnessed a dip of 60bp both on a yoy/qoq basis to 10.6%. The MIP segment witnessed pressures of low level of mining activities and slowing industrial capex, resulting into a 2.9%/9.1% on yoy/qoq of decline in the segment to `678cr (`698cr). EBIT margin (at 15.7%) also witnessed some contraction, in-line with pressure on the top line. The E&E segment witnessed good revenue traction, owing to offtake from the building electrical segment in product business and favorable product mix in project business to record yoy growth of 26.0% to `847cr (`672cr). EBIT margin came in at 8.4%, a dip of 450bp/60bp on a yoy/qoq basis.
Exhibit 7: Segmental performance
Engg & Const. (E&C)
21.3
20.0
9,721
8,015
8,099
Mach. & Ind. Products (MIP)
678
698
746
Electrical & Electronics (E&E)
847
672
690
Others
222
160
199
39.1
11.6
94
133
157
(29.5)
(40.1)
Intersegment revenue
(2.9)
(9.1) 26.0
22.7
1,035
900
810
15.0
27.7
Mach. & Ind. Products
106
116
122
(8.1)
(12.9)
Electrical & Electronics
71
87
62
(18.2)
14.0
Others
48
17
42
177.0
12.9
-
3
(9)
0.0
(100.0)
Engg. & Const.
10.6
11.2
10.0
60 bp
60 bp
Mach. & Ind. Products
15.7
16.6
16.3
(90) bp
(60) bp
Engg. & Const.
Intersegment margins
Electrical & Electronics Others
8.4
12.9
9.0
(450) bp
(60) bp
21.5
10.8
21.2
1070 bp
30 bp
9,828
7,334
8,830
34.0
11.3
Mach. & Ind. Products
690
272
560
153.5
23.4
Electrical & Electronics
1,386
1,157
1,278
19.8
8.5
630
223
568
182.5
10.9
19,601
18,763
19,502
Engg. & Const.
Others Unallocable
4.5
0.5
Source: Company, Angel Research
October 22, 2011
4
Larsen & Toubro | 2QFY2012 Result Update
Subsidiary performance L&T InfoTech registers decent performance L&T InfoTech, the company’s technology subsidiary, reported a strong performance for 2QFY2012, registering 34.9% yoy and 7.5% qoq growth in revenue. On the profitability front, the subsidiary reported NPM of 13.6%.
Order book analysis As of 2QFY2012, L&T stands tall on an order backlog of`1,42,185cr. Order inflow for 2QFY2012 stands at `16,096cr, down 21.3% yoy. Orders of ~25% came from the international market, owing to traction on hydrocarbon/T&D space and slowing domestic order inflows. L&T’s order book is majorly dominated by the infra (37%) and power (31%) segments. Process (15%), hydrocarbon (13%) and others (4%) constitute the balance part of the order book. The company has given a guidance of 5% for order booking in FY2012, which is above our expectations.
Exhibit 8: Slowing order booking trend (` cr) 35,000
30,313
30,000 25,000 20,000 15,000
Exhibit 9: Order book composition
23,843 20,464
18,365 17,793 14,417 12,453 12,517 9,571
15,626
16,190 16,096
13,366
10,000 5,000 -
9 0 Y F Q 2
9 0 Y F Q 3
Process
9 0 Y F Q 4
0 1 Y F Q 1
0 1 Y F Q 2
Hydrocarbon
Source: Company, Angel Research
0 1 Y F Q 3
Power
0 1 Y F Q 4
1 1 Y F Q 1
1 1 Y F Q 2
Infrastructure
1 1 Y F Q 3
1 1 Y F Q 4
Others
2 1 Y F Q 1
2 1 Y F Q 2
Total
1,42,185cr)
160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 -
9 0 Y F Q 2
9 0 Y F Q 3
9 0 Y F Q 4
Process
0 1 Y F Q 1
0 1 Y F Q 2
Hydrocarbon
0 1 Y F Q 3
0 1 Y F Q 4
Power
1 1 Y F Q 1
1 1 Y F Q 2
1 1 Y F Q 3
Infrastructure
1 1 Y F Q 4
2 1 Y F Q 1
2 1 Y F Q 2
Others
Source: Company, Angel Research
Client wise, 39% of L&T’s outstanding order book comes from the public sector, with 47% from the private sector. Captive work orders account for the balance 14%. Notably, there has been a drop in the share of public sector orders.
Key highlights from the concall Working capital has deteriorated with increasing debtor levels, which increased by ~`1,200cr since FY2011-end levels. Net working capital has increased to `11,400cr from `7,200cr at FY2011-end levels mainly to support sub-contractors in a tough macro environment. The company booked a forex loss of > `100cr from receivables versus loss of `120cr in 2QFY2011. Management has highlighted that it still has to receive the land for the Hyderabad Metro Project and that the appointed data is yet to happen. It does not expect to book any significant revenue from the project in the coming quarters. L&T has spent about `700cr in capex already and expects to end the year with a `1,500cr capex as guided earlier. It has also infused equity investments of `860cr into subsidiaries and developmental projects and expects about`1,500cr of such investments in the full year, which was again in-line with earlier guidance.
October 22, 2011
5
Larsen & Toubro | 2QFY2012 Result Update
Outlook and valuation We maintain Buy with a target price of `1,714 We believe L&T will continue to occupy a unique position in the Indian E&C space as a diversified and large engineering play, with exposure to areas ranging from power, defense, nuclear to equipment, in spite of short-term concerns. We have marginally tweaked our estimates to incorporate management’s revised guidance and recent developments in the company and sector.
Exhibit 10: Change in estimates – Mainly to incorporate change in revenue and other income
Revenue EBITDA margin (%) PAT
53,503
53,503
-
64,569
62,568
11.9
11.9
-
12.0
12.0
(3.1) -
3,954
3,954
-
4,736
4,555
(3.8)
Source: Company, Angel Research
At the CMP of `1,336, the stock is trading at 18.1x FY2013E earnings and 2.8x FY2013E P/BV on a standalone basis. We have used the sum-of-the-parts (SOTP methodology to value the company to capture all its business initiatives and investments/stakes in different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to `1,714, which provides 28.3% upside from current levels. It may be noted here that the L&T stock has historically traded at a premium to the BSE Sensex. At our SOTP target price, the stock would trade at 23.2x FY2013E standalone adj. EPS of `74.0, which is at a premium of ~66% over Angel’s FY2013E Sensex target P/E multiple of 14x and in-line with the historical premium commanded by L&T over BSE Sensex.
Exhibit 11: L&T – Parent historic P/E multiple premium to BSE Sensex 140% 120% 100% 80% 60% 40% 20% 0% 2 1 -O t-c 0 4
2 1 -J a n -0 5
2 1 A p r0 5
2 1 -J u l0 5
2 1 -O tc 0 5
2 1 -J a n -0 6
2 1 -A p r0 6
2 1 -J u l0 6
2 1 -O tc -0 6
L&TPremium/(Discount)toSensex
2 1 Ja n -0 7
2 1 -A p -r0 7
2 1 -J u -l0 7
2 1 -O tc -0 7
2 1 Ja n -0 8
2 1 -A p -r0 8
7YEARAVG
2 1 -J u -l0 8
2 1 -O tc -0 8
2 1 Ja n -0 9
2 1 -A p -r0 9
2 1 -J u -l0 9
2 1 -O tc -0 9
5YEARAVG
2 1 Ja n -1 0
2 1 -A p -r1 0
2 1 -J u -l1 0
2 1 -O tc -1 0
2 1 Ja n -1 1
2 1 -A p -r1 1
2 1 -J u -l1 1
2 1 -O tc -1 1
3YEARAVG
Source: Company, Angel Research
October 22, 2011
6
Larsen & Toubro | 2QFY2012 Result Update
On one-year forward P/E basis, historically L&T has traded at an average P/E of 27.3x, 29.3x and 26.7x over the past seven, five and three years, respectively. Thus, our implied target P/E multiple of 23.2x is below its historical average.
Exhibit 12: L&T – Parent one-year forward P/E band 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 2 1 -O c -t0 4
2 1 -J a n -0 5
2 1 -A p r0 5
2 1 -J u l0 5
2 1 -O c -t0 5
2 1 -J a n -0 6
2 1 -A p r0 6
P/E
2 1 -J u l0 6
2 1 -O c -t0 6
2 1 -J a n -0 7
2 1 -A p r0 7
7YEARAVG
2 1 -J u l0 7
2 1 -O c -t0 7
2 1 -J a n -0 8
2 1 -A p r0 8
2 1 -J u l0 8
2 1 -O c -t0 8
2 1 -J a n -0 9
2 1 -A p r0 9
2 1 -J u l0 9
2 1 -O c -t0 9
2 1 -J a n 1 0
5YEARAVG
2 1 -A p r1 0
2 1 -J u l1 0
2 1 -J a n 1 1
2 1 -O c -t1 0
2 1 -A p r1 1
2 1 -J u l1 1
2 1 -O c -t1 1
3YEARAVG
Source: Company, Angel Research
There has been a slight lowering of our target price for L&T to factor in lower PE multiples for its parent and subsidiary, considering the overall de-rating of multiples across sectors and change in earnings for the parent.
Exhibit 13: Derivation of SOTP based target price for L&T (FY2013E) P/E
IDPL (stake - 97.5%)
P/BV
L&T Infotech
P/E
L&T Finance
Mcap Basis
Tractor Engineers Companies Associate L&T MHI Boilers and Turbines (stake - 51%)
18x FY2013E Earnings
L&T acq. 2.36% stake of IDFC at Rs118cr in 1QFY11
5,728
93
5.4
12x FY2013E Earnings
5,196
84
4.9
20% holding company discount
5,844
95
5.5
P/E
8x FY2013E Earnings
129
2
0.1
P/E
8x FY2013E Earnings
2,000
32
1.9
P/E
8x FY2013E Earnings
2,342
38
2.2
Satyam Stake
Mcap
20% holding company discount
Other Investments
P/BV
1x FY2013E Book Value, Mcap
147
2
0.1
2,143
35
2.0
Source: Company, Angel Research
October 22, 2011
7
Larsen & Toubro | 2QFY2012 Result Update
Exhibit 14: Key assumptions
cr)
Order Inflow
42,020
51,600
69,572
79,769
79,809
Revenue
24,878
33,926
37,035
43,905
53,503
92,236 62,568
Order Backlog (Y/E)
52,680
70,300
100,239
130,217
157,210
186,242
Source: Company, Angel Research
Exhibit 15: Angel EPS forecast vs. consensus FY2012E
64.2
69.7
8.5
FY2013E
74.0
81.0
9.5
Source: Company, Angel Research
October 22, 2011
8
Larsen & Toubro | 2QFY2012 Result Update
Investment arguments The L&T stock has underperformed BSE Sensex by ~16.5% in the last three months owing to factors such as slowing order inflows and rising competition (especially in BTG equipment segment) leading to fears of slippage on order inflow guidance. Also, L&T lost the public sector shipyard, Mazagon dock, for defense and naval ships and failed to win the recent ONGC pipeline tenders. We believe though L&T would find it difficult to meet its revised guidance (growth of 5% in order inflow and 25% in revenue), it is better placed than its peers on a number of counts (such as diversification and balance sheet strength). It should also be noted that we have already factored in slippages on the order inflow front and even after factoring them, we note that order booking is much higher compared to revenue. Therefore, we believe L&T is best placed to benefit from the gradual recovery in the capex cycle, given its diverse exposure to sectors, strong balance sheet and cash flow generation as compared to its peers, which grapple with issues such as strained cash flow, high leverage and limited net worth and technological capabilities. On the valuation front, due to the recent correction in prices, the stock is trading at PE of 12.9x FY2013E earnings, adjusted for subsidiary value, which is lower than its historical PE of 15-20x.
We believe L&T is in an enviable position, given the apparent shortage of good-quality constructors in India. L&T's strong balance sheet, a sound execution engine, wide array of capabilities, integrated operations tailored to suit India's infrastructure growth story and multiple, recurring value-unlocking triggers over the medium term lead us to place faith in this default India infrastructure story. L&T has an order book of > `1.4tn, which provides a good revenue visibility. : Investment in the construction segment is expected to double over the Twelfth Plan Period, and the PPP model is assuming greater significance in delivering and meeting physical targets in the different segments of the infrastructure space. The government, through regulatory changes, is focusing on the construction segment through the PPP mode of investment. The government expects the PPP share in the Twelfth Plan to be at 50%. This has become imperative due to the widening gap between demand for infrastructure and financial resources available with the government to fund the same. Given the high growth opportunities present in L&T's varied business verticals (infrastructure and finance), we feel the company provides a great infusion-dilution opportunity. It should be noted that such moves lead to short-term dilution in equity, leading to the EPS getting temporarily depressed. However, it also shores up the net worth of the company, which fuels its future growth. Further, it serves as a benchmark for valuing the entity.
October 22, 2011
9
Larsen & Toubro | 2QFY2012 Result Update
Exhibit 16: Recommendation summary
CCCL
19
- Neutral
2,199
2,362
2,646
9.7
2.5
1.5
3.6
18.4
7.4
12.5
5.3
2.8
HCC
26
- Neutral
4,093
4,152
4,633
6.4
1.2
(1.0)
0.6
(25.8)
-
-
-
4.0
160
193
Buy
2,438
3,024
3,980
27.8
13.6
12.5
14.0
1.5
5.0
5.4
4.8
-
35
60
Buy
5,651
5,798
6,994
11.2
5.9
4.2
6.1
1.6
3.0
4.2
2.9
4.2
JP Assoc.
70
85
Buy 13,832 15,092 17,683
13.1
5.5
3.7
5.3
(1.8) 12.7
18.7
13.1
-
Punj Lloyd
54
18.3
(5.4)
2.5
4.0
21.7
13.4
3.0
IRB Infra IVRCL
- Neutral
7,850
9,585 10,992
-
-
54
82
Buy
5,074
5,755
6,689
14.8
6.4
5.5
6.7
2.4
4.0
4.6
3.8
3.2
Sadbhav
127
167
Buy
2,209
2,602
2,865
13.9
8.0
8.7
10.0
12.2
6.4
5.8
5.0
3.2
Simplex In.
205
299
Buy
4,889
5,286
6,178
12.4
21.5
20.4
29.9
18.1
9.5
10.0
6.8
2.9
Patel Engg
96
- Neutral
3,499
3,272
3,587
1.2
18.4
17.1
16.7
(4.7)
0.8
0.8
0.8
2.7
Madhucon
70
106
Buy
1,816
1,959
2,512
17.6
5.6
5.8
6.8
10.7
4.2
4.0
3.4
3.5
203
259
Buy
4,049
4,910
6,484
26.5
22.3
23.9
25.3
6.4
1.5
1.4
1.4
5.5
NCC
ITNL
Source: Company, Angel Research
Exhibit 17: SOTP break-up
CCCL HCC
21 4
100 9
23
54
16
37
-
-
-
21 44
IRB Infra
101
52
-
-
70
36
IVRCL
43
71
-
-
-
-
4
2
18
9
193
17
29
-
-
JP Assoc.
31
37
30
35
-
-
60
-
-
24
29
Punj Lloyd
72
100
-
-
-
85
-
-
-
-
-
NCC
53
65
2
2
72
8
10
-
-
18
22
Sadbhav
90
54
-
-
82
76
46
-
-
-
-
167
Simplex In.
299
100
-
-
Patel Engg.
40
33
47
38
-
-
-
-
-
-
299
16
13
-
-
19
16
Madhucon
59
55
2
2
122
33
31
-
-
12
12
106
ITNL
90
35
-
-
143
55
-
-
25
10
259
-
Source: Company, Angel Research
October 22, 2011
10
Larsen & Toubro | 2QFY2012 Result Update
Profit & loss statement (Standalone)
Less: Excise duty Other operating income % chg
398
321
390
476
556
23
280
360
409
397
555
41.3
36.4
9.2
18.6
21.9
16.9
Total Expenditure
22,051 30,094 32,295 38,306
47,197
55,113
Net Raw Materials
12,963 16,798 17,309 21,272
26,287
30,696
14,870
17,364
Other Mfg costs
6,168
9,434 11,144 12,160
Personnel
1,535
1,998
2,379
2,885
3,186
3,721
Other
1,386
1,864
1,463
1,990
2,853
3,332
% chg
58.8
35.6
23.7
18.1
12.6
18.2
(% of Net Sales)
11.4
11.4
12.9
12.9
11.9
12.0
202
283
380
562
717
894
Depreciation& Amortisation % chg
62.8
35.3
22.8
15.5
11.0
17.4
(% of Net Sales)
10.6
10.5
11.9
11.6
10.5
10.6
123
350
505
647
750
853
488
643
768
1,087
1,471
1,607
16.3
16.7
16.6
19.8
23.3
22.0
28.5
20.3
18.4
15.3
15.9
(871) (1,394)
(429)
-
-
Interest & other Charges Other Income (incl pft from Ass/JV) (% of PBT) % chg
Extraordinary Expense/(Inc.)
51.5
(166)
Tax
982
1,231
1,641
1,946
2,048
2,373
(% of PBT)
31.1
26.1
27.3
33.0
32.4
32.4
Less: Minority interest (MI)
-
-
-
-
-
-
Prior period items
-
-
-
-
-
-
48.9
32.4
11.5
15.5
18.3
15.2
7.9
7.7
7.9
7.7
7.4
7.3
48.9
32.4
11.5
15.5
18.3
15.2
% chg (% of Net Sales)
% chg
October 22, 2011
333
11
Larsen & Toubro | 2QFY2012 Result Update
Balance sheet (Standalone)
Equity Share Capital
58
118
121
122
122
Preference Capital
-
-
-
-
-
123 -
Reserves& Surplus
9,497
12,343
18,191
21,725
24,899
28,698
Total Loans Deferred Tax Liability
3,584 61
6,556 48
6,801 77
7,161 263
8,381 263
10,276 263
Gross Block
4,189
5,575
7,236
8,897
11,041
13,844
Less: Acc. Depreciation
1,239
1,418
1,728
2,224
2,940
3,835
696
1,038
858
785
942
1,130
-
-
-
-
-
-
16,314
23,448
26,362
34,951
42,172
49,420
964
775
1,432
1,730
1,342
561
3,664
6,791
5,997
8,189
10,261
12,856
Other
11,685
15,882
18,932
25,032
30,570
36,003
Current liabilities
13,684
17,842
21,243
27,823
33,234
38,385
3
0
-
-
-
-
Minority Interest
Capital Work-in-Progress Goodwill Current Assets Cash Loans & Advances
Mis. Exp. not written off
October 22, 2011
12
Larsen & Toubro | 2QFY2012 Result Update
Cash flow statement (Standalone) Profit before tax
3,155
4,713
5,881
5,904
6,311
Depreciation
202
283
387
562
717
894
Change in Working Capital
377
2,049
(1,143)
1,711
2,199
2,878
Less: Other income
488
643
768
1,087
1,471
1,607
Direct taxes paid
988
873
1,519
1,946
2,048
2,373
(Inc.)/ Dec. in Fixed Assets
(1,622) (1,980)
(1,481)
(1,589)
(2,301)
(2,991)
(Inc.)/ Dec. in Investments
(3,620) (1,329)
(5,442)
(979)
(1,000)
(1,500)
643
768
1,087
1,471
1,607
Other income
488
Issue of Equity
1,702
23
2,133
347
Inc./(Dec.) in loans
1,560
1,922
168
360
1,220
1,895
Dividend Paid (Incl. Tax)
114
717
863
996
1,085
1,139
Others
(28)
(183)
249
345
(4)
(3)
(130)
(190)
657
299
(389)
(781)
Inc./(Dec.) in Cash
October 22, 2011
7,314
13
Larsen & Toubro | 2QFY2012 Result Update
Key Ratios
P/E (on FDEPS)
41.9
31.7
28.4
24.6
20.8
18.1
P/CEPS
37.7
28.3
24.9
20.9
17.5
15.0
P/BV
8.5
6.5
4.5
3.7
3.3
2.8
Dividend yield (%)
0.9
0.6
0.8
0.9
1.1
1.1
EV/Sales
3.4
2.6
2.4
2.0
1.7
1.5
29.8 6.4
22.8 4.6
18.3 3.5
15.5 3.0
14.1 2.6
12.2 2.3
2.1
2.1
2.7
3.0
3.0
3.0
EPS (Basic)
74.3
59.2
72.6
65.0
69.8
80.3
EPS (fully diluted)
31.9
42.2
47.0
54.3
64.2
74.0
Cash EPS
35.4
47.1
53.6
63.9
76.5
89.2
DPS
12.6
8.4
10.2
12.4
14.5
15.1
156.5
204.1
299.9
357.8
409.8
472.0
EV/EBITDA EV / Total Assets Order Book to Sales
Book Value
10.5
10.5
11.8
11.5
10.4
10.5
Tax retention ratio
0.7
0.7
0.7
0.7
0.7
0.7
Asset turnover (x)
2.6
2.2
1.8
1.7
1.8
1.8
19.0
17.2
15.1
13.2
12.6
12.5
3.0
5.1
5.5
6.2
6.5
6.2
Operating ROE
0.2 22.8
0.4 21.8
0.4 18.6
0.3 15.0
0.3 14.2
0.3 14.4
EBIT margin
ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x)
ROCE (Pre-tax)
24.9
22.0
19.7
18.5
17.8
18.0
Angel ROIC (Pre-tax)
27.6
23.3
20.7
19.6
18.7
18.5
ROAE
25.6
23.6
18.8
16.6
16.9
16.9
7.0
6.9
5.8
5.4
5.4
5.0
Inventory / Sales (days)
54
54
36
12
12
12
Receivables (days)
94
94
105
98
95
97
Payables (days)
60
63
73
79
87
89
Working capital cycle (ex-cash)
23
35
42
38
44
53
Net debt to equity
0.3
0.5
0.3
0.2
0.3
0.3
Net debt to EBITDA
0.9
1.5
1.1
1.0
1.1
1.3
21.4
10.1
8.6
7.8
7.5
7.7
Asset Turnover (Gross Block)
Interest Coverage
October 22, 2011
14
Larsen & Toubro | 2QFY2012 Result Update
Research Team Tel: 022 - 39357800
E-mail:
[email protected]
Website: www.angelbroking.com
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report . Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information.
Disclosure of Interest Statement
L&T
1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Buy (> 15%) Reduce (-5% to 15%)
October 22, 2011
Accumulate (5% to 15%) Sell (< -15%)
Neutral (-5 to 5%)
15
