FREE

MOSL: Morning India (25/April/18): 1. Larsen & Toubro; 2. GST; 3. Bharti Airtel; 4. Bharti Infratel; 5. Chola Invest & Fin; 6. Oberoi Realty; 7. Delta Corp; 8. Persistent Systems; 9. Zensar Tech

MOrning India (25/April/18): 1. Larsen & Toubro; 2. GST; 3. Bharti Airtel; 4. Bharti Infratel; 5. Chola Invest & Fin; 6. Oberoi Realty; 7. Delta Corp; 8. Persistent Systems; 9. Zensar Tech

 

Today’s top research idea

Larsen & Toubro: The Monitorable Troika; Order inflow, domestic execution and working capital are key

• We expect L&T to achieve its order inflow guidance with FY18 orders at INR1.5t (+5% YoY). However With general elections scheduled for May 2019, we expect ordering to slow down in 4QFY19/1QFY20; government orders usually slowdown in the quarter preceding/during the election quarter, as the election code of conduct sets in.
• Execution momentum is expected to remain strong in 4QFY18, with E&C revenue growth of 12% supported by pickup in domestic project execution. For FY18, we expect revenue growth of 9% (10-12% guidance), driven by a revival in execution of large domestic orders that LT has bagged over the past two years.
• NWC to remain ~22% of sales in 4QFY18 given higher working capital required to improve domestic execution
• We maintain our Buy rating, with an SOTP-based price target of INR1,650 (E&C business at 24x FY20E EPS, to which we add INR500 for subsidiaries).

Piping hot news

India may face pressure to cut duties on 90% of goods traded with China

• India is likely to face greater pressure to eliminate duties on 90% of goods it trades with China under the mega trade agreement among 16 Asia Pacific countries that is in the works. Officials said that China, which has till now not aggressively pushed to fast track negotiations in the Regional Comprehensive Economic Partnership (RCEP), has shown a new keenness to “engage actively” ahead of the next round of talks later this week, the first after it its trade standoff with the US.