Broker's call: L&T (Buy)

| Updated on June 17, 2019 Published on June 18, 2019

Anand Rathi

L&T (Buy)

CMP: ₹1,499

Target: ₹1,820

Benefit from leadership: L&T is the undisputed market leader in India’s capital goods and construction space. The likely recovery of India’s capex cycle, especially infra and hydrocarbon would benefit L&T substantially with double digit revenue growth and faster order book expansion.

Diversified order book: While L&T has large exposure to public capex, nearly half the order book comes from Indian corporate and overseas orders which substantially reduces the risk of slower than expected public capex.

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.

Published on June 18, 2019
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