EUR 120.00 For Business Accounts Only

MOSL: Morning India (10/December/19): 1. Larsen & Toubro (Bracing for macro headwinds); 2. Economy (FoE: Gross domestic savings were broadly unchanged in 1HFY20); 3. Oil & Gas; 4. India Life Insurance

Morning India (10/December/19):

Today’s top research idea
Larsen & Toubro: Bracing for macro headwinds
** We have revisited our order inflow assumption to factor in risks of capex cuts and the likely delay in order awarding from the Maharashtra government post the change of government in the state.

** We recall that ~INR160b worth orders pertaining to Andhra Pradesh and the Mumbai Coastal Road project are slow-moving currently. Additionally, we suspect near-term slowdown in construction activity in Maharashtra state owing to state elections and delay in formation of a new government.

** Thanks to L&T's well-diversified business across verticals as well as geographies, it is in a better position to overcome macro challenges compared to mid-cap EPC companies dependent on any single segment or geography.

** We cut our core E&C EPS estimate by 1.5%/3.4% for FY20/FY21, incorporating lower order inflow/revenue growth assumption. Consol. EPS has been cut by 1.3%/2.6% for FY20/FY21. Our TP now stands at INR1,680 (prior: INR1,830). Adjusted for the valuation of subsidiaries, the stock trades at FY20/FY21E P/E multiple of 19x/15.6x v/s its long-term trading average P/E multiple of 23x. Maintain Buy.

Piping hot news
Mutual fund investors cash out amid November market rally
Net inflows into equity mutual fund schemes crashed to ₹1,690.48 crore in November, the lowest since ₹320 crore seen in June 2016, as soaring stocks prompted investors to cash out. The November figure, released by the Association of Mutual Funds in India (Amfi) on Monday, is 79.91% lower than the ₹8,414 crore net inflows seen in November 2018 and 72% lower than ₹6,037.78 crore in October 2019.