result update larsen & toubro …static-news.moneycontrol.com/static-mcnews/2017/06/...larsen...

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Edelweiss Securities Limited

Despite 14% EBITDA miss in Q4FY17, we retain our conviction on Larsen & Toubro (L&T) as we believe operating profitability, adjusted for non-recurring items, is still reasonable. Key highlights: a) working capital to sales at 4 year best of 19% is commendable given that it’s in the back drop of a reasonable 12% revenue growth; b) despite slow traction in 45 of the ongoing 600 plus jobs, core infra segment’s FY17 revenue grew 7% YoY with 8.8% margin (down 160bps YoY), which we believe are bottom-cycle margins; and c) management’s focus on improving balance sheet & preferring cash over revenue is apparent with operating cash flow at INR60bn (up 43% YoY). Pinning our hopes on public infra recovery as elaborated in our recent sector note, “Engineering and Capital Goods - Capex recovery: Here it comes!; sector update” we maintain ‘BUY’ with revised TP of INR 1,950(PE of 25x vs 23x; earlier INR1,802) given focus on improving balance sheet and working capital, which places L&T in a favourable position amongst infra peers as the best capex play.

PAT beat driven by non-recurring items; impressive WC & cash flows Despite an in line top line for Q4 and an EBITDA miss of 14%, reported PAT growth at

30% YoY (31% higher versus expectation) was driven by sharp rise in other income (up

3x YoY) and low tax rates. L&T’s initiatives of demobilizing from non- paying sites &

focusing on paying customers has helped control working capital and improve cash

flows which in our view is a key differentiator ahead of a full blown capex cycle over

the next 2-3 years.

Guidance reasonable in current times; PSU sector key catalyst Management expects strong ordering in public infra segments like water, oil & gas,

railways etc., apart from large pipeline in defence. Our bottom-up appraisal of key

sectors like oil & gas, railways, T&D, defence etc., lends comfort w.r.t. L&T’s 12-

14%/12% order intake/top-line guidance, which in our view is achievable.

Outlook and valuations: B/S focus key positive; maintain ‘BUY’ L&T has shifted focus on quality of business & cash flows, which in our view is a key

value driver as the company consolidates its balance sheet ahead of an upcoming full

capex cycle. We envisage the re-rating over the next 12-24 months once private sector

complements the PSU capex cycle providing cherry picking & margin comfort to L&T &

a pickup in domestic execution to 15-20% levels. Maintain ‘BUY/SP’.

RESULT UPDATE

LARSEN & TOUBRO Balance sheet focus yielding dividends

COMPANYNAME

EDELWEISS 4D RATINGS

Absolute Rating BUY

Rating Relative to Sector Outperform

Risk Rating Relative to Sector Medium

Sector Relative to Market Overweight

MARKET DATA (R: LART.BO, B: LT IN)

CMP : INR 1,782

Target Price : INR 1,950

52-week range (INR) : 1,810 / 1,295

Share in issue (mn) : 933.3

M cap (INR bn/USD mn) : 1,663 / 25,788

Avg. Daily Vol.BSE/NSE(‘000) : 1,727.8

SHARE HOLDING PATTERN (%)

Current Q2FY17 Q1FY17

Promoters *

- - -

MF's, FI's & BK’s 38.7 39.3 38.5

FII's 17.3 16.3 17.2

Others 44.0 44.4 44.3

* Promoters pledged shares (% of share in issue)

: NIL

PRICE PERFORMANCE (%)

Stock Nifty EW

Construction Index

1 month 1.9 3.2 (0.7)

3 months 21.3 8.2 15.7

12 months 20.8 17.8 22.2

Amit Mahawar +91 22 4040 7451

[email protected]

Swarnim Maheshwari +91 22 4040 7418

[email protected]

India Equity Research| Engineering and Capital Goods

May 29, 2017

Financials (Consolidated) (INR mn)

Year to March Q4FY17 Q4FY16 % Chg Q3FY17 % Chg FY17 FY18E FY19E

Net revenues 368,280 328,755 12.0 262,870 40.1 1,100,110 1,269,642 1,456,920

EBITDA 43,351 44,947 (3.6) 25,356 71.0 110,747 134,072 154,818

Adjusted Profit 33,057 22,867 44.6 9,724 239.9 59,198 65,302 77,364

Diluted EPS (INR) 35.5 24.6 44.6 10.5 239.9 63.7 70.2 83.2

Diluted P/E (x) 23.3 21.1 17.8

EV/EBITDA (x) 19.5 16.2 14.1

ROAE (%) 12.6 12.4 13.3

https://www.edelresearch.com/showreportpdf-36667/ENGINEERING_AND_CAPITAL_GOODS_-_SECTOR_UPDATE-MAY-17-EDEL

https://www.edelresearch.com/showreportpdf-36667/ENGINEERING_AND_CAPITAL_GOODS_-_SECTOR_UPDATE-MAY-17-EDEL

Engineering and Capital Goods

2 Edelweiss Securities Limited

Analyst meet highlights:

FY18 guidance (consol) revised: 1) Revenue guidance: Revised guidance up to 12%

now vs 10% earlier; 2) Order intake: Revised up order intake guidance to 12-14% vs

10% earlier mainly due to deferral of awards; 3) Margins: Guidance of 50bps

improvement (ex-services) maintained.

Slower revenue growth: Management highlighted 2 specific reasons for lower revenue

growth: 1) Q3 saw slowdown due to demonetisation impact on residential busienss;

and 2) the company went slow on government projects on purpose as it does not get

paid even if it executes projects faster.

Slow infra jobs: L&T deleted INR180bn worth of slow moving orders from its OB and

now has no slow moving orders; 85% of the projects today are on track.

Performance highlights: 1) Order Intake up 10% YoY in Q4, implying order intake and

order book growth of 5% YoY, excluding slow moving items. Domestic order inflow up

10% YoY for 2017; 2) Cash flow from operations up to INR60bn, up 43 % YoY; 3) WC

down to 19% vs 23% of sales; 4) Debt-to-equity improved to 1.75x vs 1.87x YoY; 5)

Margins ex services up 50bps YoY; 6) Interest cost fell led by repayment.

Growth outlook:

Defence: Government is mandating a focused approach for the private sector on

defence capex. Tactical communication system/Battlefield Management System is

currently not in focus due to fund allocation. L&T is positioned to do submarines only in

strategic partnership category. It will take 10 years for any private player to do

aerospace and hence does not look practical. In Future Infantry Combat Vehicle, L&T is

the highest scorer, but will take some time.

Defence pipeline: Survey vessels at INR200bn and LPDs at INR200bn, Pinaka at INR50bn

ASW at INR100bnis the pipeline. FY18E L&T will see INR 100bn in defence orders.

Railways: The next big work is station redevelopment and safety aspect (interlocking

and breakchain, etc). The high speed corridor will take time as it is very complex (1-2

yrs). So, Dedicated Fright Corridor East, electrification and safety and station

development work are large value. L&T will not participate in station work if private

investment is mandated.

Power: There is no movement in private capex. 17GW thermal plants are lying idle

without PPAs. Since green power is taken at a price much lower than conventional fuel.

Hyderabad Metro: L&T has started developing around 3mn sq ft of the 18.5 mn sq ft

real estate.

Infra segment is growing at 8-10%; this must grow at 11-12% at least considering the

opportunities that L&T has in emerging countries. Residential & commercial factories

and building remained weak in FY17 with both top-line & new orders witnessing a drop.

Hydrocarbon business: Funding and speed of decision needs to be seen, potential

remains strong in domestic market.

Metals minerals: INR10-12bn jobs likely for L&T this year.

Switchgear will do better going ahead.

Valves, meters, construction machinery business will be restructured.

Larsen & Toubro


Other key highlights:

INR10bn of NPA provision was created in FY17 (of which INR6.8bn was in Q4FY17) due

to accelerated provisions.

Table 1: Key segmental performance

Source: Company, Industry,Edelweiss research

Segments

Q4FY17 Q4FY16 % change FY17 FY16 % change

Revenues

Infra 203,010 187,548 8.2 539,208 505,583 6.7

Power 18,386 18,916 (2.8) 69,388 64,268 8.0

Heavy Engineering 10,347 10,605 (2.4) 34,469 32,559 5.9

Electrical Automation 16,786 16,181 3.7 53,673 54,013 (0.6)

Hydrocarbons 25,797 24,494 5.3 96,283 86,183 11.7

IT & services 25,486 23,753 7.3 98,875 90,146 9.7

Financial Services 22,065 21,233 3.9 85,453 76,950 11.1

Development projects 10,065 8,450 19.1 43,673 46,200 (5.5)

Others 441,173 29,047 1,418.8 108,624 97,204 11.7

Total 773,115 340,227 127.2 1,129,646 1,053,106 7.3

EBIT margins

Infra 12.4 15.0 8.8 10.4

Power 3.2 (1.8) 2.9 9.0

Heavy Engineering 21.8 (0.4) 14.5 (5.9)

Electrical Automation 14.3 11.8 10.2 9.2

Hydrocarbons 8.1 (3.6) 5.3 (0.2)

IT & services 17.9 18.2 18.5 18.8

Financial Services (2.4) 26.6 9.2 13.4

Development projects (6.2) 11.1 0.7 13.5

Others 0.9 10.7 3.8 11.6

Consolidated Consolidated



Table 2: Edelweiss bottoms-up order intake assumptions

Source: Company, Industry,Edelweiss research

Table 3: SOTP valuation

Source: Edelweiss research

(INR bn) FY15 FY16 FY17E FY18E FY19E Comments

Process (MMH) 62 41 22 26 32 Late cycle pick up

Power 155 27 29 53 99

BoP/Gas/EPC etc 75 27 12 19 47

BTG 80 0 17 34 51 Company appears favorable placed in about 10GW orders over

Hydrocarbons 108 95 186 140 146

India 40 45 41 55 61 Expect pick from refining and pipeline orders

Exports 68 50 145 85 85

Infrastructure 854 849 786 894 999

T&D- Middle East 64 51 50 60 55 We expect growth momentum to sustain on the back of

T&D- India 126 133 143 157 145 L&T's entry into distribution is expcted to keep the order inflow

ticking.

Factories & Buildings (Residential) 134 90 60 65 69 We exepct some slowdown in the residenital in near term. To

Factories & Buildings (Commercial/IT

park/ Industrials)

171 154 127 133 170 We exepct some slowdown in the residenital in near term. To

pick up from FY20

Transportation/Urban Infra (India) 120 150 140 182 220 Steady pick up in rail and urban infra projects

Transportation/Urban Infra (Middle 120 75 56 68 81

Roads (Including ME) 55 110 70 76 82 Steady state growth

Water 64 86 140 154 177 L&T has shown good traction in municipality orders in the last

12 months and we expect this segment to do well in coming

years, given strong project award pipeline.

Developmental Projects - - - - - We expect L&T to go slow in new development projects

Defence & shipbuilding 45 25 120 150 150 Inreased ordering from shipbuilding and defence contracts led

by LPD , BMS ,submarine and othe defence contracts

Others (Heavy Engineering, E&E) 120 113 72 100 120

TOTAL 1,345 1,149 1,215 1,364 1,545

% change 29.7 (14.5) 5.7 12.3 13.2

Valuation

methodologyMultiple

L&T's

stake (%)

Value

(INR mn)

Per share

(INR)Remark

L&T Core Engineering

business

PE 25 100 1,496,382 1,607 In l ine with early cycle multiples

L&T MHI (BTG JVs) DCF - 51 56,668 31 DCF basis

L&T Infotech & technology

services

PER 86.5% 109,032 117 Assuming value in line with Current market

Cap adjusted for minority stake

L&T Finance Holdings 67% 108,930 118 Assuming value in line with Current market

Cap adjusted for minority stake

L&T Develoment Projects P/BV 1.2 80% 62,000 67 Equity Invested til l FY17

Hyderabad Metro DCF 100 10,765 12 Remains to be seen if Telangana state

would like to take a controlling stake in the

project

Total 1,833,013 1,950

Larsen & Toubro


Financial snapshot (INR mn) Year to March Q4FY17 Q4FY16 % change Q3FY17 % change FY17 FY18E FY19E

Net revenues 368,280 328,755 12.0 262,870 40.1 1,100,110 1,269,642 1,456,920 Staff costs 35,004 34,291 2.1 34,961 0.1 138,531 152,357 167,546

Direct costs 252,538 220,749 14.4 172,838 46.1 726,772 849,390 986,335

Other operating expenses 37,387 28,768 30.0 29,715 25.8 124,061 133,823 148,221

Total expenditure 324,929 283,808 14.5 237,514 36.8 989,363 1,135,570 1,302,102

EBITDA 43,351 44,947 (3.6) 25,356 71.0 110,747 134,072 154,818

Depreciation 7,227 4,244 70.3 7,223 0.1 23,699 22,098 23,315

EBIT 36,124 40,704 (11.3) 18,133 99.2 87,048 111,974 131,503

Other income 3,995 1,450 175.4 2,439 63.8 14,010 14,523 15,121

Interest 2,966 4,394 (32.5) 3,788 (21.7) 13,398 15,232 16,477

Profit before tax 34,343 38,245 (10.2) 16,784 104.6 88,874 111,264 130,146

Tax 3,372 10,094 (66.6) 4,399 (23.3) 20,066 37,830 44,250

Core profit 30,247 23,352 29.5 9,724 211.0 60,413 65,302 77,364

Extraordinary items (2,810) 485 NA - 1,214 - -

Adjusted Profit 33,057 22,867 44.6 9,724 239.9 59,198 65,302 77,364

Equity capital(FV INR 2) 1,245 1,245 1,245 1,246 1,247 1,247

No. of shares (mn) 930 930 930 930 930 930

Diluted EPS (INR) 35.5 24.6 44.6 10.5 239.9 63.7 70.2 83.2

As % of net revenues

Direct costs 68.6 67.1 65.8 66.1 66.9 67.7

Employee cost 9.5 10.4 13.3 12.6 12.0 11.5

Other operating expenses 10.2 8.8 11.3 11.3 10.5 10.2

EBITDA 11.8 13.7 9.6 10.1 10.6 10.6

Adjusted net profit 9.0 7.0 3.7 5.4 5.1 5.3

Tax rate 9.8 26.4 26.2 22.6 34.0 34.0

Change in Estimates

FY18E FY19E

New Old % change New Old % change Comments

Net Revenue 1,269,642 1,290,062 (1.6) 1,456,920 1,478,877 (1.5)

EBITDA 134,072 136,196 (1.6) 154,818 156,350 (1.0)

EBITDA Margin 10.6 10.6 10.6 10.6

Adjusted Profit

After Tax

65,302 61,276 6.6 77,364 74,832 3.4 Building in lower interest cost

with better working capital

management

Net Profit Margin 5.5 5.1 5.7 5.5

Capex 31,503 31,503 0.0 31,503 31,503 0.0



Company Description

Larsen & Toubro (L&T), headquartered in Mumbai, is a technology-driven engineering and

construction organisation, and one of the largest companies in India's private sector. It has

additional interests in manufacturing, services, and information technology. A strong

customer-focused approach and the constant quest for top-class quality has enabled the

company attain and sustain leadership in its major lines of businesses over seven decades.

L&T has an international presence, with a global spread of offices. A thrust on international

business over the past few years has seen overseas earnings growing to 18% of total

revenues. With factories and offices located around the country, further supplemented by a

wide marketing and distribution network, L&T's image and equity extend to virtually every

district of India. Investment Theme

Diversified business dominance imparts unique flexibility: L&T has a dominant position and

market share in most operating verticals, be it oil & gas, process projects, roads, bridges, or

industrial structures. This imparts flexibility to cherry-pick projects across a wide range of

projects and thus helps optimize overall business profitability.

New segments: Potent growth catalysts: L&T will have to garner INR100-150bn new orders

annually over FY17-19E to cover lost ground owing to tepid Middle East market and weak

F&B segment. We believe, the much needed succour will come from defence,

transportation and power T&D sectors in the domestic market, which are anticipated to gain

palpable momentum in light of the government’s ‘Make in India’ focus.

L&T’s initiatives of demobilizing from non- paying sites & focusing on paying customers has

helped control working capital and improve cash flows which in our view is a key

differentiator ahead of a full blown capex cycle over the next 2-3 years.

Key Risks

Perceived risk of a slowdown in Middle East capex due to sharp drop in global oil prices

can severely impact L&T’s order intake and revenue accruals.

Further delay in recovery of the domestic investment cycle.

Continued deterioration in working capital requirement.


Larsen & Toubro

Financial Statements

Income statement (INR mn)

Year to March FY16 FY17 FY18E FY19E

Income from operations 1,019,753 1,100,110 1,269,642 1,456,920

Direct costs 674,418 726,772 849,390 986,335

Employee costs 133,308 138,531 152,357 167,546

Other Expenses 107,399 124,061 133,823 148,221

Total operating expenses 915,125 989,363 1,135,570 1,302,102

EBITDA 104,628 110,747 134,072 154,818

Depreciation 17,867 23,699 22,098 23,315

EBIT 86,761 87,048 111,974 131,503

Add: Other income 9,043 14,010 14,523 15,121

Less: Interest Expense 16,551 13,398 15,232 16,477

Add: Exceptional items 942 1,214 - -

Profit Before Tax 80,196 88,874 111,264 130,146

Less: Provision for Tax 24,848 20,066 37,830 44,250

Less: Minority Interest 3,118 4,443 4,773 6,013

Associate profit share (9,902) (3,952) (3,359) (2,520)

Reported Profit 42,329 60,413 65,302 77,364

Exceptional Items 942 1,214 - -

Adjusted Profit 41,387 59,198 65,302 77,364

Shares o /s (mn) 930 931 931 931

Diluted shares o/s (mn) 930 931 931 931

Adjusted Diluted EPS 44.5 63.6 70.1 83.1

Dividend per share (DPS) 18.3 15.3 16.1 17.7

Dividend Payout Ratio(%) 48.2 29.5 28.7 26.6

Common size metrics


Operating expenses 89.7 89.9 89.4 89.4

EBITDA margins 10.3 10.1 10.6 10.6

Net Profit margins 4.4 5.8 5.5 5.7

Growth ratios (%)


Revenues 10.8 7.9 15.4 14.8

EBITDA (7.7) 5.8 21.1 15.5

PBT 11.1 10.8 25.2 17.0

Adjusted Profit (6.3) 43.0 10.3 18.5

EPS (6.3) 42.8 10.3 18.5

Key Assumptions


Macro

GDP(Y-o-Y %) 7.2 6.5 7.1 7.7

Inflation (Avg) 4.9 4.8 5.0 5.2

Repo rate (exit rate) 6.8 6.0 5.8 5.8

USD/INR (Avg) 65.0 67.5 69.0 69.0

Company

Process (33.9) 20.0 20.0 20.0

Oil & Gas (11.9) 50.0 2.0 2.0

Power (82.4) 4.5 87.0 85.0

Infra (0.7) (7.3) 14.0 12.0

Others (20.0) 55.0 25.0 10.0

Excise duty as % of rev 1.0 0.9 1.3 1.3

Tax rate (%) 20.1 19.3 27.0 27.0

Total no. of employees 43,354 44,655 45,994 49,214

Employee cost per head 1 1 1 1

Net borrowings (INR mn) 8,226 (33,296) 4,500 4,501

Customer adv as % of OI - 10.0 10.0 10.0

Capex (INR mn) 6,434 6,575 5,100 5,101

Dep. (% gross block) 8.0 9.2 7.4 7.4



Peer comparison valuation

Market cap Diluted P/E (X) P/B (X) ROAE (%)

Name (USD mn) FY18E FY19E FY18E FY19E FY18E FY19E

Larsen & Toubro 25,788 25.4 21.4 3.0 2.7 12.4 13.3

Bharat Heavy Electricals 5,819 34.2 21.4 1.1 1.1 3.4 5.3

Thermax 1,849 38.1 30.1 4.4 3.8 11.4 13.0

Median - 34.2 21.4 3.0 2.7 11.4 13.0

AVERAGE - 32.6 24.3 2.9 2.6 9.0 10.5

Source: Edelweiss research

Cash flow metrics


Operating cash flow (32,289) 52,317 58,231 55,770

Investing cash flow (41,320) (62,267) (31,503) (31,503)

Financing cash flow 74,885 31,149 (12,978) (15,721)

Net cash Flow 1,276 21,199 13,750 8,545

Capex (50,582) (48,143) (31,503) (31,503)

Dividend paid (17,000) (14,272) (14,986) (16,484)

Profitability and efficiency ratios


ROAE (%) 9.9 12.6 12.4 13.3

ROACE (%) 7.5 7.1 8.3 9.2

Inventory Days 29 23 19 19

Debtors Days 86 90 87 87

Payable Days 133 143 139 139

Cash Conversion Cycle (17) (30) (33) (33)

Current Ratio 2.7 2.8 2.8 2.7

Gross Debt/EBITDA 8.5 8.5 7.2 6.3

Gross Debt/Equity 1.9 1.8 1.6 1.5

Adjusted Debt/Equity 1.9 1.8 1.6 1.5

Interest Coverage Ratio 5.2 6.5 7.4 8.0

Operating ratios


Total Asset Turnover 0.8 0.8 0.8 0.9

Fixed Asset Turnover 4.3 4.4 5.1 5.7

Equity Turnover 2.3 2.2 2.2 2.3

Valuation parameters


Adj. Diluted EPS (INR) 44.5 63.6 70.1 83.1

Y-o-Y growth (%) (6.3) 42.8 10.3 18.5

Adjusted Cash EPS (INR) 64.3 80.2 93.9 108.1

Diluted P/E (x) 33.2 23.3 21.1 17.8

P/B (x) 3.1 2.7 2.5 2.2

EV / Sales (x) 2.4 2.2 1.9 1.7

EV / EBITDA (x) 23.3 22.1 18.3 15.9

Dividend Yield (%) 1.2 1.0 1.1 1.2

Balance sheet (INR mn)

As on 31st March FY16 FY17 FY18E FY19E

Share capital 1,863 1,866 1,866 1,866

Reserves & Surplus 439,941 500,299 550,615 611,495

Shareholders' funds 441,804 502,165 552,481 613,361

Minority Interest 28,928 35,636 40,409 46,422

Short term borrowings 269,117 266,357 263,597 260,838

Long term borrowings 615,464 677,041 697,041 717,041

Total Borrowings 884,580 943,397 960,638 977,878

Long Term Liabilities 4,247 5,266 5,266 5,266

Sources of funds 1,347,490 1,475,962 1,548,291 1,632,424

Gross Block 226,356 240,760 270,761 300,762

Net Block 137,378 113,964 127,720 140,276

Capital work in progress 17,905 21,182 22,182 23,182

Intangible Assets 111,875 131,845 126,495 121,126

Total Fixed Assets 267,157 266,991 276,396 284,584

Non current investments 79,709 93,834 93,834 93,834

Cash and Equivalents 128,841 193,719 207,469 216,014

Inventories 48,542 41,397 48,382 56,182

Sundry Debtors 260,250 279,696 322,798 370,413

Loans & Advances 682,834 740,159 770,938 849,107

Other Current Assets 460,531 470,830 494,371 514,146

Current Assets (ex cash) 1,452,156 1,532,082 1,636,490 1,789,848

Trade payable 557,339 584,080 650,911 735,371

Other Current Liab 23,035 26,583 14,986 16,484

Total Current Liab 580,374 610,664 665,897 751,855

Net Curr Assets-ex cash 871,781 921,417 970,591 1,037,992

Net Deferred tax (12,069) (10,503) (10,503) (10,503)

Uses of funds 1,347,490 1,475,962 1,548,291 1,632,424

BVPS (INR) 475.3 539.4 593.4 658.8

Free cash flow (INR mn)


Reported Profit 42,329 60,413 65,302 77,364

Add: Depreciation 17,867 23,699 22,098 23,315

Interest (Net of Tax) 11,423 10,373 10,053 10,875

Others (82,260) (47,199) (18,872) (63,329)

Less: Changes in WC 21,648 (5,030) 20,350 (7,544)

Operating cash flow (32,289) 52,317 58,231 55,770

Less: Capex 50,582 48,143 31,503 31,503

Free Cash Flow (82,871) 4,174 26,728 24,267


Larsen & Toubro

Insider Trades

Reporting Data Acquired / Seller B/S Qty Traded

25 Apr 2017 NAIK A M Sell 50000.00

13 Apr 2017 NAIK A M Sell 25000.00

07 Apr 2017 NAIK A M Sell 25000.00

07 Apr 2017 NAIK A M Sell 20000.00

07 Apr 2017 NAIK A M Sell 20000.00

*in last one year

Bulk Deals Data Acquired / Seller B/S Qty Traded Price

04 Nov 2016 Administrator Of The Specified Undertaking Of The Unit Trust Of I Sell 4941234 1416.05

04 Nov 2016 Uti Admnstr Of The Specified Undertaking Of Uti-Unit Schm 64 Sell 4941234 1415.65

04 Nov 2016 State Bank Of India Buy 5655000 1415.58

*in last one year

Holding – Top10 Perc. Holding Perc. Holding

Life insurance corp 15.69 L & t emp wel founda 12.3

Unit trust of india 6.55 Hdfc asset managemen 3.33

Icici prudential ass 1.97 General insurance co 1.91

Icici prudential lif 1.84 Gic private limited 1.48

Blackrock 1.26 Sbi funds management 1.21

*in last one year

Additional Data

Directors Data AM Naik Chairman K Venkataramanan Managing Director

S N Subrahmanyan Whole Time Director & Senior Executive Vice President Shailendra Roy Whole Time Director & Senior Executive Vice President

N Mohan Raj Nominee Director - LIC Thomas Mathew T Nominee Director - LIC

M V Kotwal Whole Time Director R Shankar Raman Whole Time Director

V K Magapu Whole Time Director AK Jain Nominee Director

M M Chitale Non Executive Director S N Talwar Non Executive Director

S Rajgopal Non Executive Director Subodh Bhargava Non Executive Director

Auditors - Sharp Tannan & Co.

*as per last annual report


Company Absolute

reco

Relative

reco

Relative

risk

Company Absolute

reco

Relative

reco

Relative

Risk

ABB India BUY SO L Bajaj Electricals HOLD SP M

Bharat Forge BUY SO M Bharat Heavy Electricals BUY SO M

CG Power and Industrial Solutions HOLD SP M Cummins India BUY SO L

Engineers India Ltd BUY SO L Greaves Cotton HOLD SP M

Havells India BUY SP M Kalpataru Power BUY SO M

KEC International BUY SP M Larsen & Toubro BUY SO M

Praj Industries BUY None None Ramkrishna Forgings BUY SP M

Siemens HOLD SP L TD Power Systems HOLD None None

Techno Electric & Engineering BUY SO M Thermax REDUCE SP L

Triveni Turbine BUY None None VA Tech Wabag BUY None None

Voltas BUY SP L

RATING & INTERPRETATION

ABSOLUTE RATING

Ratings Expected absolute returns over 12 months

Buy More than 15%

Hold Between 15% and - 5%

Reduce Less than -5%

RELATIVE RETURNS RATING

Ratings Criteria

Sector Outperformer (SO) Stock return > 1.25 x Sector return

Sector Performer (SP) Stock return > 0.75 x Sector return

Stock return < 1.25 x Sector return

Sector Underperformer (SU) Stock return < 0.75 x Sector return

Sector return is market cap weighted average return for the coverage universe

within the sector

RELATIVE RISK RATING

Ratings Criteria

Low (L) Bottom 1/3rd percentile in the sector

Medium (M) Middle 1/3rd percentile in the sector

High (H) Top 1/3rd percentile in the sector

Risk ratings are based on Edelweiss risk model

SECTOR RATING

Ratings Criteria

Overweight (OW) Sector return > 1.25 x Nifty return

Equalweight (EW) Sector return > 0.75 x Nifty return

Sector return < 1.25 x Nifty return

Underweight (UW) Sector return < 0.75 x Nifty return


Larsen & Toubro

Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.

Board: (91-22) 4009 4400, Email: [email protected]

Aditya Narain

Head of Research

[email protected]

Coverage group(s) of stocks by primary analyst(s): Engineering and Capital Goods

ABB India, Bharat Heavy Electricals, Bharat Forge, Bajaj Electricals, CG Power and Industrial Solutions, Engineers India Ltd, Greaves Cotton, Havells India, KEC International, Cummins India, Kalpataru Power, Larsen & Toubro, Praj Industries, Ramkrishna Forgings, Siemens, TD Power Systems, Techno Electric & Engineering, Thermax, Triveni Turbine, VA Tech Wabag, Voltas

Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe

Rating Distribution* 161 67 11 240 * 1stocks under review

Market Cap (INR) 156 62 11

Date Company Title Price (INR) Recos

Recent Research

29-May-17 BHEL In recovery mode; order inflow prime focus; Result Update

153 Buy

29-May-17 CG Power & Industrial Solutions

Domestic operations stable;

overseas exit key to re‐rating;; Result Update

93 Hold

26-May-17 VA Tech Wabag

Operating results in line; Growth prospects intact; Result Update

675 Buy

> 50bn Between 10bn and 50 bn < 10bn

Buy Hold Reduce Total

Rating Interpretation

Buy appreciate more than 15% over a 12-month period

Hold appreciate up to 15% over a 12-month period

Reduce depreciate more than 5% over a 12-month period

Rating Expected to

-

149

297

446

594

743

Jan

-14

Feb

-14

Mar

-14

Ap

r-1

4

May

-14

Jun

-14

Jul-

14

Au

g-1

4

Sep

-14

Oct

-14

No

v-1

4

De

c-1

4

(IN

R)

One year price chart

1,200

1,340

1,480

1,620

1,760

1,900

May

-16

Jun

-16

Jul-

16

Jul-

16

Au

g-1

6

Sep

-16

Oct

-16

Oct

-16

No

v-1

6

De

c-1

6

De

c-1

6

Jan

-17

Feb

-17

Feb

-17

Mar

-17

Ap

r-1

7

Ap

r-1

7

May

-17

(IN

R)

Larsen & Toubro



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Larsen & Toubro

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