Larsen & Toubro Rating- Buy - Poised for rapid growth scale-up
时间:2024-09-29 04:52:57 阅读(143)
We hosted Larsen & Toubro (L&T) at Edelweiss India’s Singapore Conference 2022. Key highlights: i) Centre/PSU capex is likely to drive infra momentum, even as macro concerns persist, while states lag. ii) Active core business portfolio rationalisation has helped optimise competitive positioning in high-growth segments like water/transportation/hydrocarbon/B&F. iii) Defence/ thermal power/hydrocarbon to lead mid-term growth.
All in all, L&T re-iterated a healthy pipeline and robust return/growth scale-up trajectory with a sharper focus on sustainability, expanding into emerging businesses. Metro turnaround, Nabha exit and buy-back would be levers to 18% RoE corridor, in our view. Retain ‘Buy’ with a SoTP-based TP of Rs 2,370 (core business valued at 25x PE).
Key takeaways from L&T’s commentaryL&T is optimistic on infra spends, despite a weak state-spends outlook. States have budgeted 30%-plus higher spends for FY23E, which might lag. Bulk of infra growth across defence, water, hydrocarbon, rail will be Centre/PSU-led. Private capex accounts for ~17% of OB for L&T (peak at 20-25%), of which 50% is pure industrial and the balance is real estate. L&T is geared to benefit further from greenfield capex (which is low) versus brownfield, which explains the current low private share. Competitive intensity is low in water, hydrocarbon, defence and T&D with 3-4 players dominating each segment. Roads has worsened with 20-plus players competing.
Bulk of 18% RoE target (vs. 11.5%; 13.5% ex-metro) should be achieved with current FY26E strategic plan – upside will depend on metro turnaround/buyback. Bulk of hydrocarbon projects opportunity is in the $200-900 mn ticket range; defence pipeline is significantly larger at Rs 300 bn-plus (vs. ~Rs 50 bn earlier).
Outlook and valuation: Focus on growth quality, returns; retain ‘BUY’L&T’s focus has directionally been towards creating stakeholder value. Active E&C portfolio rationalisation, site-level cash flows, exit of non-core, better clarity on capital allocation and sharper sustainability focus are some key initiatives that could make a material difference going ahead. While L&T, in the recent past, has moved directionally with its IT subsidiaries, we believe expanding growth avenues, potential for a reasonable return/cash flow scale-up, should drive shareholder value creation going ahead. Retain ‘BUY/SO’ with a SoTP-based TP of Rs 2,370 (core business valued at 25x PE).
上一篇:OYO to refile updated draft IPO papers with SEBI by mid-February
下一篇:Yatharth Hospitals IPO opens for subscription, GMP rises; should you subscribe to the public issue-
猜你喜欢
- Patna Metro Expansion- Feasibility study planned for extending Patna metro rail network to birthplace of Guru Gobind Singh
- Crude oil prices fall on strong dollar, sticky inflation
- Crude oil price edges higher on prospect of tighter supplies
- Paytm Recap 2023- 912 crore merchant payments made via Paytm in Q2FY24; Delhi made most payments between 12-6 am
- Park Hotels owner files draft papers for Rs 1,050 crore IPO with Sebi
- Share Market Highlights- Nifty, Sensex end flat, Bank Nifty closes up 210 pts; Reliance Industries leads loss
- Share Market Highlights- Nifty settles above 17900, Sensex jumps 350 pts; Bank Nifty above 43000, Bajaj shares gain
- SGX Nifty down, mixed global cues, Nifty-Bank Nifty support, resistance; key things to watch out for on 4 July
- Share Market Highlights- Nifty closes above 17750, Sensex surges 120 pts; Bank Nifty ends above 41570, Adani stocks gain