EUR 120.00 For Business Accounts Only

MOSL: Morning India (6/May/20): 1. Larsen & Toubro (No worries on order inflows; execution takes center stage); 2. Jindal Steel; 3. NIIT Tech; 4. Persistent; 5. Expert Speak (Retail)

Morning India (6/May/20):

Today’s top research Idea
Larsen & Toubro: No worries on order inflows; execution takes center stage
** Order wins on strong footing: In the past one month, L&T has announced core E&C orders worth INR300b+. Our deep dive analysis suggests strong order inflows from the power sector. Power T&D (part of infra segment) witnessed robust 26% growth in FY20E to ~USD3b (International orders +58%, domestic orders +8%)

** Order book stands tall at INR3t+: Strong OB of over INR3t (FY18-20E CAGR at 10.8%), implying FY20E OB/Rev ratio of 3x, providing strong revenue visibility.

** Expect L&T to focus on working capital rather than just top line growth: Project
execution has become challenging lately owing to COVID-19 scenario. L&T would have to continue supporting its vendor base in these tough times as it has been doing over the past many months, which is likely to increase its working capital.

** Still in a strong position compared to FY12-14 period: E&A deal conclusion to provide strong buffer of USD2b of cash proceeds, as we do not see any risk of deal cancellation. Since FY16, the company has taken multiple steps to emerge as a pure-play EPC company.

** Maintain Buy with TP of INR1,200: We maintain our earnings estimate and ascribe target multiple of 16x on the core business (25% discount to long-term average to capture near-term uncertainty).