-------- Forwarded Message --------
Subject: L&T: The Indian Caterpillar; Cuts Its Guidance & Order Inflow
For FY-16
Date: Tue, 3 Nov 2015 08:43:58 +0530
From: Asis Ghosh <asis...@gmail.com>
Reply-To: asis...@gmail.com
*Q2FY16 consolidated PAT at Rs.686 cr (gross 996- exceptional 310) *
*down 20% YOY(Estimate at 944)*
Q2 EPS at 7.34 (consensus at 10.99; QOQ-6.48)
The company slashed its FY-16 order & revenue guidance to 6% & 12.5%
from 15% earlier !!
*CMP: 1389*
*
*
*Buy: 1350-1325-1300*
*
*
*TGT: 1425-1510 (1-3M)*
*
*
*TGT: 1575-1627-1676 & 1825-1895 (12-24M)*
*
*
*TSL< 1285*
Note: For LT, technically, 1335 is a strong support area and the zone
around 1350-1300 should attract good demands for the stock. Consecutive
closing below 1285 zone for any reason, LT can further fall to
1250-1225-1198 area, where it may be again accumulated for better
investment buy average.
*Some key takeaways & rationale:*
As we all know, Q2FY16 result of LT was below street estimates and
further the management disappoints the market with very tepid and
slashed down guidance for expected order inflow & revenue for the the
rest of the FY-16.
As par the company, lower commodity prices and weakening currency has
been constraining growth prospectus and hurting business and it may take
further time for healthy pick-up in business opportunities. Investment
momentum in our domestic economy has not picked up sufficiently leading
to order inflow and many projects in Middle East are currently under
review due to low oil prices.
After the announcement of the result, the stock tanked around 7% and
from mid July peak, LT has already corrected by over 25% under
performing the broader market.
This is not very surprising, given the soft numbers of order inflows in
Q1FY16 and the stock may be already discounted to a great extent, going
by the time & price action of the same.
Analysts are somewhere divided but if we take an average of their 12M TP
estimates, it may comes to around 1580 amid various ratings.
Some analysts are also very conservative of LT's own guidance and feel
that the management is taking over cautious stance in order to prune the
market estimates and going forward, we may see above estimate numbers
from LT as well.
In Q2, LT's EBITDA was mainly affected by higher than estimated
depreciation and interest costs.
Looking ahead, disinvestment of some of LT's assets and IT subsidiary
(L&T Infotech) listing will be positive for it (balance sheet deleverage).
Being an Indian "Caterpillar", its a preferred choice of domestic
economic and infra growth story.
Although, there has been delays in order awarding side, expected gradual
recovery in capex cycle and PMO/Govt's active intervention to resolve
the stalled projects issue may change the landscape for LT.
But the big question is when and how fast this recovery will happen and
for that market will keenly watch the H2FY16 numbers & guidance of LT,
being the proxy for corporate India.
*As par BG metrics & current market parameters:*
(Stand alone TTM & Projected EPS)
*Present median valuation of LT may be around: 1365 (FY:15/TTM)*
*Projected fair valuations might be around: 1485-1650-1810 (FY:16-18) *
SCRIP EPS(TTM) BV(Act) P/E(AVG) Low High Median
200-DEMA 10-DEMA
LT 53.88 398.31 22 1388.78 1327.81 1358.29
1627.1 1487.37
LT 63.95 440.15 22 1513.00 1446.58 1479.79
1627.1 1487.37
LT 78.55 486.45 22 1676.84 1603.22 1640.03
1627.1 1487.37
LT 94.45 537.75 22 1838.74 1758.01 1798.37
1627.1 1487.37
*Analytical Charts:*
<http://2.bp.blogspot.com/-JtMkiVxdfBM/Vjgjiqhl_ZI/AAAAAAAAEtA/KwMNST4ea3M/s1600/LT-WK-02-11-2015.png>
<http://3.bp.blogspot.com/-PV7k2_fVbGo/VjgjkId_IpI/AAAAAAAAEtI/B2THDZif_1g/s1600/LT-FIBB-02-11-2015.png>
<http://4.bp.blogspot.com/-2Qg57pj6qGA/Vjgjl42cruI/AAAAAAAAEtQ/951Rflb9sos/s1600/LT-WK-MA-02-11-2015.png>
<http://1.bp.blogspot.com/--90dCEQIqAY/VjgjoTSuOuI/AAAAAAAAEtY/dLiTHNWTMxA/s1600/LT-TL-02-11-2015.png>
<http://3.bp.blogspot.com/-VGUXuoryIko/VjgjqWem3zI/AAAAAAAAEtg/EmphB7a2hFs/s1600/LT-PATTERN-02-11-2015.png>
<http://2.bp.blogspot.com/-ddK4NwfzzZE/VjgjsNUxV2I/AAAAAAAAEto/6Us6GPaKRBc/s1600/LT-TL-ST-02-11-2015.png>
--
Thanks & Regards,
Asis Ghosh
(asisghosh.blogspot.com)
NCFM-TA Certified
--
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