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MOSL: Morning India (29/June/18): 1. Larsen and Toubro; 2. Automobiles (Retail sales mixed across segments); 3. Technology

MOrning India (29/June/18): 1. Larsen and Toubro (FY19 orders to be driven by Water, Heavy Civil and Hydrocarbon); 2. Automobiles (Retail sales mixed across segments); 3. Technology (Improved outlook led by optimism on deals and Digital)

 

Today’s top research idea

Larsen and Toubro: FY19 orders to be driven by Water, Heavy Civil and Hydrocarbon; Domestic execution pick-up to drive sales

Water, Heavy Civil and Hydrocarbons to drive orders in FY19

• Order prospects for FY19 stand at INR6.2t (up 11% YoY; refer Exhibit 1 for details), with a lower share of large-sized orders compared to the previous year. The company maintained its FY19 order growth guidance of ‘+10-12% YoY’ – Water, Heavy Civil and Hydrocarbon segments are expected to be the key growth drivers.
• Segment-wise, 15% growth is targeted in the Infrastructure segment (ex T&D) in FY19, with orders in the T&D vertical estimated to be flat YoY. In the current fiscal, order growth in the Transportation Infra and Building & Factories (including Smart World) segment is expected to be lower than Water and Heavy Civil segment.
• We maintain Buy with an SOTP-based TP of INR1,540 (E&C business at 22x FY20E EPS, to which we add INR520 for subsidiaries)

Piping hot news

India preparing to cut oil imports from Iran after US action

• India’s oil ministry has asked refiners to prepare for a “drastic reduction or zero” imports of Iranian oil from November, two industry people said, the first sign that New Delhi is responding to a push by the US to cut trade ties with Iran.