MOSL: LARSEN & TOUBRO (Buy)-Adj. PAT exceeds estimate in a quarter of multiple one-offs
Larsen & Toubro: Adj. PAT exceeds estimate in a quarter of multiple one-offs
(LT IN, Mkt Cap USD26.9b, CMP INR1320, TP INR1540, 17% Upside, Buy)
- PAT exceeds estimates: PAT (adjusted for one-offs) of INR15.8b in 1QFY19 was ahead of our estimate of INR14.6b. While we had only built in INR3.5b of profit on sale of the Kattupalli port in our estimates, there were additional one-offs relating to (a) INR4b profit/loss reversal on road INVIT, (b) write-down/provisioning in realty amounting to INR7.5b, (c) impairment charge on hydel projects of INR1b and (d) Ind-AS impact on realty profit of INR0.8b (post-tax).
- Sales increased 19% YoY to INR283b, ahead of our estimate of INR263b, led by Hydrocarbon (+39% YoY), IT (+31% YoY), Finance (+39% YoY), Infrastructure (+10% YoY) and Realty.
- E&C sales increased 10% YoY in 1QFY19, with domestic E&C growing at 8% and overseas E&C at 14%. Domestic E&C growth was driven by Infrastructure (+13% YoY) and Hydrocarbon (+ 56% YoY); Power declined 53% YoY. Growth in overseas E&C was driven by Hydrocarbon (+26% YoY).
- E&C margin expanded 130bp YoY to 7.4% (est. of 7.7%), led by higher margins in Heavy Engineering (18.9%, +18.8% YoY) and Hydrocarbons (7%, +30bp YoY). Infrastructure margin shrank 30bp YoY to 6.8%, primarily on account of INR320m of ECL provisions included this quarter.
Larsen and Toubro is engaged in the following business segments: Engineering & Construction; Electrical & Electronics; Machinery & Industrial Products; and Other. Engineering and construction segment comprises execution of construction projects in civil, mechanical and electrical engineering. Electrical and electronics segment comprises the manufacture and sale of switchgear, petroleum dispensing pumps, and medical equipment. Machinery and industrial products segment comprises the manufacture and sale of industrial machinery and equipment. Other segment includes property and software development, generation of power for consumption by Haldia Petrochemicals Limited, and financial services.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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