LT

Sell Larsen and Toubro Future; target of Rs 1257

Larsen & Toubro (L&T) has been consolidating within bearish triangle since last couple of weeks. In the previous week stock confirmed a trend reversal after three white soldiers failed to carry the positive momentum beyond Rs1,375 which turns out to be the bearish resistance line. The support trend line of triangle is placed at Rs1307.The daily RSI has failed to ignite positive momentum and has been struggling to surpass the resistance of 55 levels. We recommend going short on L&T May Futures below Rs1307 with stop loss of Rs 1332 for target of Rs 1257. (Duration 7 days).

Sell Larsen and Toubro Future; target of Rs 1223

Larsen & Toubro (SELL, Below Rs1,283, Target Rs1,223): Larsen & Toubro has signaled a trend reversal after three white soldiers failed to carry the positive momentum beyond Rs1,375 which turns out to be the bearish resistance line. The break away gap appearing on Tuesday trading session was also filled up after an appearance of negative candle on Wednesday trading session. The daily RSI has failed to ignite positive momentum and has been struggling to surpass the resistance of 55 levels. We recommend going short on L&T April Futures below Rs 1283 with stop loss of Rs 1313 for Target of Rs 1223. (Duration 7 days). 

Buy L&T above Rs 1337; target Rs 1387

Larsen & Toubro (L&T) has confirmed breakout from symmetrical triangle above Rs 1332 levels which turned out to be the apex of the formation. And with prices trading above the medium term moving average of 50 DMA, the uptrend has been corroborated. The daily RSI is indicating a positive crossover after sideways trend which supports buying argument in the counter however the MACD is currently placed at neutral position. We recommend buying L&T above Rs 1337 with stop loss of Rs 1312 for target of Rs 1387. 

Buy Larsen & Toubro; target Rs 1,607 

Larsen & Toubro (L&T) Construction bagged orders worth Rs 18.75 billion from various segments during March 2012. The Power Transmission and Distribution IC secured new orders in domestic as well international markets from reputed customers. Domestic orders worth Rs 7.01 billion include a major order from Tamil Nadu Electricity Board for the construction of 148km, 400kV DC (Quad) transmission line from Pugalur to Pandiankuppam in Tamil Nadu. The project will be completed in 18 months. The company has bagged two additional orders for the construction of substations at Malaysendra from Karnataka Power Transmission Corporation and at Jind, Haryana, from Power Grid Corporation of India. International orders, valued at Rs 1.94 billion, include those for construction of a 220/33kV substation and various orders for ongoing projects at UAE. The Building and Factories IC has bagged new orders aggregating Rs 8.41 billion. This includes construction of residential apartments in Chennai and Mumbai from leading developers. Another new order has been received for the construction of a mall in Bangalore. In the Solar Business Unit, L&T Construction has secured orders worth Rs 1.39 billion from reputed developers for the construction of a 5.75 MW Solar PV plant on EPC basis in Rajasthan and general civil works for 1x125 MW solar thermal power project in Gujarat.

At the CMP of Rs 1,307, the stock is trading at PE of 18.5x FY2013E earnings, which is below the historical trading multiple for L&T. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in different businesses. Ascribing separate values to its parent business on P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs 1,607, which provides 23.0% upside from current levels. Hence, we maintain our Buy recommendation on the stock.

Accumulete Larsen & Toubro; target Rs 1,437

It`s finally curtains for this financial year for Larsen and Toubro (LT). The much discussed order inflow trend looks different and to a certain extent disappointing. The purpose of this note is to highlight the emerging trends of order inflows through some data points. However, it would not have any implications on our estimates as of now.

Picture not perfect:

LT`s order inflow stood at Rs 495 billion at the end of 9MFY12 and in Q4FY12E, the order intake reported in public domain stood at Rs 161.8 billion as against Rs 300 billion in Q4FY11 (actual). With this, the tally for FY12E order inflow stands at Rs 655 billion (reported) as against Rs 797 billion (actual) in FY11. However, as in Q3FY12, where the unreported order stood at Rs 83 billion (Rs 10.5 billion internal BOT order booking), we hope a similar number would come up this quarter too. The order inflow number then would stand at Rs 735 billion for FY12E which is just 8% de-growth YoY (above our expectation of 10% YoY de-growth).

Nature experiences `winds of change`:

A sneak peek into the pattern of the inflows reveals a host of Buildings & Factories (Rs 135 billion) and Infrastructure (transportation and urban Infra, Rs 187 billion) orders. Together, Buildings and Infrastructure have become almost half of LT`s order inflows (Rs 321 billion); hence, moving away from high technology sectors like Hydrocarbon & Power. (Data points showing changes in inflows are given on the next page).

Our take:

This year has not been a complete washout year and the performance on a high base remains satisfactory. What needs to be seen now is how the gradual increase in the planned expenditure of the Government pans out. We are expecting Rs 717 billion (Flat YoY) worth order inflow in FY13. However, degrowth on a YoY basis cannot be ruled out. We maintain `Accumulate`.

Buy Larsen & Toubro; target Rs 1,607

Larsen & Toubro`s (L&T) construction arm bagged new orders worth Rs 11.4 billion under various divisions during March 2012. The company`s building and factories division has secured a Rs 9.7 billion order for the design and construction of a IT campus facility in Kolkata. The project will be executed on a joint venture model along with Shapoorji & Pallonji Co within a period of 32 months. L&T Oman LLC has bagged a new contract worth Rs 1.7 billion from Oman Electricity Transmission Co for replacing some substations within 15 months.

Valuation:

At the CMP of Rs 1,363, the stock is trading at PE of 19.3x FY2013E earnings, which is below the historical trading multiple for L&T. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in different businesses. Ascribing separate values to its parent business on P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs 1,607, which provides 17.9% upside from current levels. Hence, we maintain our Buy rating on the stock.

 

Buy Larsen and Toubro; target Rs 1,466

Larsen and Toubro (L&T) posted good set of numbers for 3QFY2012, which were above our and street expectations mainly on account of robust top-line growth and higher other income. L&T reported decent top-line growth of 22.7% yoy to Rs 139.99 billion (Rs 114.13 billion), above our estimates of 6.6% growth, mainly on account of pick-up in the E&C segment. We note that this performance was in spite of high base created in 3QFY2011 (L&T reported yoy top-line growth 40.5%). On the EBITDA front, performance was below our expectations mainly on account of higher-than-anticipated MTM forex losses. L&T reported higher than anticipated other income, owing to higher income on its investments and dividend income from subsidiaries. Therefore, the bottom line came in at Rs 9,916 million (14.4% above our estimates).

As of 3QFY2012, L&T`s order backlog stands at Rs 1,457.68 billion (Rs 1,148.82 billion), 26.9% yoy growth, which is mainly on account of order inflow being higher than execution on absolute terms. Order inflow for the quarter grew by stunning 28.2% to Rs 171.29 billion (Rs 133.66 billion) covering some of the lost ground in 1HFY2012. For 9MFY2012, the order inflow stands at flat Rs 494.15 billion (Rs 49,456).

During the last quarter, management had significantly cut its order inflow guidance for FY2012, mainly to factor in the general slowdown faced by the sector, but this time they have refrained from the same and maintained their revised guidance (yoy 5% growth on order inflow and 25% on revenue front for FY2012), which we believe factors in aggressive run rate for 4QFY2012 (yoy growth of 13.3% on order inflow and 32.0% on revenue front for 4QFY2012). We expect management to miss the guidance and pencil in 5% yoy de-growth in order inflow and 22.5% yoy growth in revenues for FY2012.

We believe L&T is best placed to benefit from the gradual recovery in the capex cycle, given its diverse exposure to sectors, strong balance sheet and cash flow generation as compared to peers. We maintain L&T as our top pick in the sector and maintain Buy on the stock with a Target Price of Rs 1,466. 

Accumulate L&T; target of Rs 1,469

L&T came out with numbers that were ahead of expectations on the revenue and profit front. However, EBITDA margins were significantly lower and it was the significant increase in other income which boosted the PAT. The operating expenses included Rs 4.0 billion of MTM charges due to INR-USD fluctuation.

Contrary to our expectations, the guidance for growth in order intake in FY12 was maintained at 5% though the management accepted that meeting the target would be a challenging task. We remain apprehensive of the management guidance and have forecast 7% decline in order intake in FY12. In FY13,we have projected 5% growth in order intake

The stock has rebounded strongly in the past few weeks. We do not see major upside in price from these levels. The stock`s premium to BHEL may restrict significant outperformance from these levels.

Stock performance would be contingent on news-flow on large order wins, commodity price trends and general economic and policy datapoints (interest rate cuts and mining and power sector reforms), we opine.

In view of the weak capex cycle, decelerating industrial growth and moderate upside to our target price, we maintain Accumulate on L&T and recommend buying on declines.

Risks - Weak capex cycle and policy bottlenecks coupled with rising capital engagement in business

Valuation and Rating: Maintain Accumulate with a revised target price of Rs 1469 (Rs 1500 earlier):

On a FY13 basis, L&T is trading at 14.9x and 12.1x PE and EV/EBITDA respectively. In view of the weak capex cycle, decelerating industrial growth and moderate upside to our target price, we maintain Accumulate on L&T and recommend buying on declines.

We revise target for the company in view of earnings revision triggered by moderation in order intake and margin pressure.

In view of the weak macro environment, we see possibility of the company revising its order intake guidance further downwards.

In our DCF valuation, we have factored in a CAGR of 14% in revenue growth between FY12-16. We work out price target of Rs 1,469, thus valuing the stock at 17x FY13 earnings (Rs 1,500 earlier).

Buy L&T; target Rs 1,453

Larsen & Toubro`s shipbuilding arm will sign a technological and licensing agreement with Japan`s Mitsubishi Heavy Industries, as both firms look for shipbuilding opportunities in emerging economies. Under the agreement, Mitsubishi will initially train engineers from L&T Shipbuilding in building vessels and assist in procuring materials from overseas and will advise on potential expansion of L&T`s shipbuilding facilities.

Mitsubishi and L&T Shipbuilding will eventually jointly market and sell commercial vessels. The companies will sign a three-year agreement starting early 2012, with an option to extend it. Currently, L&T and Mitsubishi are operating two joint ventures to manufacture power-related equipment, including supercritical boilers, and steam turbines and generators, which they signed in 2007.

At the CMP of Rs 1,029, the stock is trading at PE of 10.0x FY2013E earnings, after adjusting for investments, which is below the historical trading multiple for L&T and, we believe, factors in most of the negatives surrounding the stock. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in different businesses.

Ascribing separate values to its parent business on a P/E basis (target multiple reduced to 16x from 18x) and investments in subsidiaries on P/E, P/BV and m-cap basis, our revised target price works out to Rs 1,453 (Rs 1,714), which provides 41.2% upside from current levels. Hence, we maintain our `Buy` recommendation on the stock.

Buy L&T; target Rs 1,714

Larsen & Toubro`s (L&T) construction arm has bagged various orders aggregating to Rs 10 billion in 3QFY2012. In the buildings and factories segment, the company has secured a Rs 2 billion order from GMR Group for the construction of an air traffic control tower and associated works at Delhi International Airport. In the power T&D segment, the company has obtained new orders adding up to Rs 3.34 billion from reputed clients for the construction of transmission lines and substations across India.

An international order valued at Rs 1.85 billion has been secured in Kuwait for the construction of a substation and associated overhead transmission line works. Orders valued at Rs 2.82 billion were secured from Greater Mohali Area Development Authority for the construction of utility facilities such as water supply network, waste-water collection network, storm water network, road works, electrical works and other associated development works in Aerocity, Mohali.

With these orders, the company`s outstanding order book stands at 1,505.5 billion (3.4x FY2011 revenue), which provides good revenue visibility. This order booking takes the company`s total declared orders to Rs 83.64 billion until now in this quarter against orders received worth 133.36 billion in 3QFY2011. The drying up of order inflows is one of the major concerns for the stock and has led to underperformance in the recent past.

Valuation:

However, at the CMP of Rs 979, the stock is trading at PE of 8.3x FY2013E earnings, after adjusting for investments, which is below the historical trading multiple for L&T and, we believe, factors in most of the negatives surrounding the stock. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in the different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs 1,714. Hence, we maintain our `Buy` view on the stock.

Buy Larsen & Toubro; target Rs 1,714

Larsen & Toubro Construction has bagged a major order valued at Rs 21.64 billion in the infrastructure segment from GMR Infrastructure. The order is for the construction of stretches consisting of six laning of Kishangarh Udaipur Ahmedabad Highway and will be executed on EPC basis. This mega project involves upgrading the existing four-lane section of the golden quadrilateral to six lane.

With this order, the company`s outstanding order book stands at Rs 1,495.53 billion (3.4x FY2011 revenue), which provides revenue visibility. This order booking takes the total declared orders to Rs 73.64 billion for L&T until now in this quarter against the order received worth Rs 133.36 billion in 3QFY2011. The drying up of order inflows is one of the major concerns for the stock and has led to underperformance in the recent past. However, at the CMP of Rs 1,172, the stock is trading at PE of 10.7x FY2013E earnings, after adjusting for investments, which is below the historical trading multiple for L&T, and we believe this factor in most of the negatives surrounding the stock.

We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in the different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs 1,714, which provides 46.3% upside from current levels. Hence, we maintain our `Buy` recommendation on the stock.

Buy Larsen; target of Rs 1395

Larsen & Toubro Limited (L&T) is a technology, engineering, construction and manufacturing company. L&T is a technology-driven USD 11.7 billion company that infuses engineering with imagination. It is considered as one of the largest and most respected companies in India's private sector. Larsen & Toubro Limited is the biggest legacy of two Danish Engineers, Henning Holck-Larsen & S.K. Toubro who built a world-class organization that is professionally managed and a leader in India's engineering and construction industry. Holck-Larsen and Toubro founded the partnership firm of L&T in 1938, which was converted into a limited company on February 7, 1946. Today, the company has grown to a large conglomerate spanning engineering and construction. ECC was conceived as Engineering Construction Corporation Limited in April 1944 and was incorporated as wholly owned subsidiary of Larsen & Toubro Limited. L&T's founders Holck - Larsen and Toubro laid the foundation for ECC.

Today, L&T is one of India's biggest and best known industrial organizations with a reputation for technological excellence, high quality of products and services, and strong customer orientation. It is also taking steps to grow its international presence. L&T has an international presence, with a global spread of offices. A thrust on international business has seen overseas earnings grow significantly. It continues to grow its overseas manufacturing footprint, with facilities in China and the Gulf region. The company's businesses are supported by a wide marketing and distribution network, and have established a reputation for strong customer support.

L&T Ltd. has reported net profit of Rs 7983.90 million for the quarter ended on September 30, 2011 as against Rs 6941.40 million in the same quarter last year, an increase of 15.02%. It has reported net sales of Rs 112452.40 million for the quarter ended on September 30, 2011 as against Rs 93307.60 million in the same quarter last year, a rise of 20.52%. Total income grew by 19.51% to Rs 116084.10 million from Rs. 97129.50 million in the same quarter last year. During the quarter, it reported earnings of Rs 13.09 a share. L&T Construction has bagged new orders valued over Rs. 1015 crore in the Building & Factories segment during the second quarter of FY12. In the commercial buildings segment, the Company secured new orders valued at Rs. 692 crore from reputed clients for the development of IT campuses, and for the construction of a commercial establishment. In the residential buildings segment, L&T won new orders valued at Rs. 323 crore for the construction of a residential tower & additional orders from on-going projects in the factories segment.

At the current market price of Rs 1234, the stock is trading at 17.09 x FY12E and 15.35 x FY13E respectively. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.72.71 and Rs.80.91 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 5% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 9.64 x for FY12E and 8.62 x for FY13E. Price to Book Value of the stock is expected to be at 2.89 x and 2.44 x respectively for FY12E and FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 1395 for medium to long term investment.

Buy Larsen & Toubro; target Rs 1,714

The L&T stock has underperformed BSE Sensex by 21.3% in the last three months, owing to factors such as slowing order inflows and rising competition (especially in the BTG equipment segment), leading to fears of slippage on order inflow guidance.

Also, L&T lost the public sector shipyard, Mazag on dock, for defense and naval ships and failed to win the recent ONGC pipeline tenders. We believe though L&T would find it difficult to meet its revised guidance for FY2012 (growth of 5% in order inflow and 25% in revenue), it is better placed than its peers on a number of counts (such as diversification and balance sheet strength).

We believe L&T is best placed to benefit from the gradual recovery in the capex cycle, given its diverse exposure to sectors, strong balance sheet and cash flow generation, as compared to its peers, which grapple with issues such as strained cash flow, high leverage and limited net worth and technological capabilities.

Valuation:

On the valuation front, due to the recent correction in prices, the stock is trading at PE of 12.3x FY2013E earnings, adjusted for subsidiary value, which is lower than its historical PE of 15-20x. Hence, we believe the recent correction provides a good opportunity to `Buy`.

Buy Larsen & Toubro`s; target Rs 1,714

Larsen & Toubro`s (L&T) construction division has bagged orders worth Rs 16.29 billion in the building and factories segment. An order worth Rs 9 billion was secured for the construction of a major IT campus facility.

Orders for the balance Rs 7.29 billion are received from various clients for the construction of a commercial building, university, residential tower and automobile factory. With these orders, the company`s outstanding order book stands at Rs 1,438.14 billion (3.3x FY2011 revenue), which provides good revenue visibility.

At the CMP of Rs 1,387, the stock is trading at 18.7x FY2013E earnings and 2.9x FY2013E P/BV on a standalone basis. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs 1,714, which provides a 23.6% upside from current levels. We recommend a `Buy` rating on the stock.

Buy Larsen and Toubro; target Rs 1,714

Larsen and Toubro (L&T) posted good set of numbers for 2QFY2012, which were above our expectations mainly on account of good top-line performance. On the order booking front, L&T has an order backlog of Rs 1,421.85 billion as of 2QFY2012.

Order inflow for the quarter stood at Rs 160.96 billion (Rs 204.64 billion), led by the infrastructure segment (31%). The company has significantly cut its guidance of order inflow from 15-20% to 5% for FY2012, mainly to factor in general slowdown faced by the sector; but it has maintained revenue growth guidance of 25% for the whole year, which we believe is aggressive.

We believe L&T is best placed to benefit from the gradual recovery in the capex cycle, given its diverse exposure to sectors, strong balance sheet and cash flow generation as compared to its peers. Further, at current valuations, after an underperformance of 16.5% to BSE Sensex over the last three months, we believe most of the negatives are factored in and, hence, we maintain our `Buy` view on the stock with a revised target price of Rs 1,714 (Rs 1,857).

We have assigned lowered PE multiple of 18x (earlier 19x) to L&T parent`s FY2013E EPS of Rs 76.4 and its subsidiaries to factor in macro headwinds faced by the sector and economy.

Buy Larsen & Toubro; target Rs 1,666

L&T`s results for 2QFY12 were broadly in line with our expectations with revenue growth of 21% YoY and PAT growth of 15% YoY. The management has lowered its order intake growth guidance for FY12 from 15% to 5%. It has also reduced its E&C EBITDA margin guidance by 25-50 bp. We expect L&T to post 14% earnings CAGR over FY11-13.

The company now expects FY12 order intake growth of 5% as against its earlier guidance of 15-20% growth. It has also lowered its EBITDA margin guidance - it now expects a decline of 75-125 bp in FY12 as against its earlier guidance of 50-75 bp decline. The company mentioned that the guidance is under the prevailing environment and does not take into account any further deterioration in the near future.

In 2QFY12, L&T reported revenue of Rs 112.4 billion (up 21% YoY), broadly in line with our estimate of Rs 111.7 billion. EBITDA margin contracted 50 bp YoY to 10.4%, in line with our estimate. Net profit (adjusted for exceptional gains) grew 15% YoY to Rs 7.9 billion, marginally higher than our estimate of Rs 7.1 billion due to higher than expected other income. Order inflow declined 21% YoY to Rs 161 billion due to slowdown in the domestic market, though there was strong inflow of large-size international orders.

E&C segment revenue grew 21% YoY while EBIT margin declined 58 bp YoY (up 60 bp QoQ). Electrical business revenue recovered sharply - up 26% YoY in 2QFY12 v/s 1% YoY growth in 1QFY12. EBIT margin for the electrical business remains under pressure - down 454bp YoY (flat QoQ). Machinery and Industrial Products (MIP) revenue declined 3% YoY (v/s 26% YoY growth in 1QFY12, help by a lower base in 1QFY11) while EBIT margin contracted 88 bp YoY and 200 bp QoQ.

Valuation:

We expect L&T to post 14% earnings CAGR over FY11-13. We maintain `Buy` with an SOTP-based target price of Rs 1,666. We believe the company is witnessing increasing risk to growth, pressure on margins and worsening working capital. Though the stock is trading at 32% discount to long-range P/E, factors in these risks to a great extent, it may see further de-rating unless external environment improves over the next 6-9 months.

Buy L&T; target of Rs 1666

L&T's results for 2QFY12 were broadly in line with our expectations with revenue growth of 21% YoY and PAT growth of 15% YoY. The management has lowered its order intake growth guidance for FY12 from 15% to 5%. It has also reduced its E&C EBITDA margin guidance by 25-50bp. We expect L&T to post 14% earnings CAGR over FY11-13.

The company now expects FY12 order intake growth of 5% as against its earlier guidance of 15-20% growth. It has also lowered its EBITDA margin guidance - it now expects a decline of 75- 125bp in FY12 as against its earlier guidance of 50-75bp decline. The company mentioned that the guidance is under the prevailing environment and does not take into account any further deterioration in the near future. In 2QFY12, L&T reported revenue of INR112.4b (up 21% YoY), broadly in line with our estimate of INR111.7b. EBITDA margin contracted 50bp YoY to 10.4%, in line with our estimate. Net profit (adjusted for exceptional gains) grew 15% YoY to INR7.9b, marginally higher than our estimate of INR7.1b due to higher than expected other income. Order inflow declined 21% YoY to INR161b due to slowdown in the domestic market, though there was strong inflow of large-size international orders.

We expect L&T to post 14% earnings CAGR over FY11-13. We maintain Buy with an SOTP-based target price of INR1, 666. We believe the company is witnessing increasing risk to growth, pressure on margins and worsening working capital. Though the stock is trading at 32% discount to long-range P/E, factors in these risks to a great extent, it may see further de-rating unless external environment improves over the next 6-9 months.

Buy Larsen & Toubro; target Rs 1,911

Larsen and Toubro (L&T)`s Q2FY2012 results exceeded our expectations with a strong execution in the engineering and construction (E&C) division as well as margin sustenance in a tough business environment. However, the Q2 order inflow was moderate at Rs 160.96 billion (down 21% year on year [YoY]). The H1 order inflow also fell by 11% to Rs 322.86 billion. Moreover, the management has reduced its order intake growth guidance to 5% as against its earlier guidance of a 15-20% growth in the order inflow for FY2012. Achieving the revised guidance would also be an uphill task for the company and implies a growth of 20% in order intake in the second half of FY2012 as compared to the corresponding period last fiscal.

Stand-alone sales up 19%: L&T has reported a strong growth in its revenues (stand-alone) for Q2FY2012; the same was higher than our expectation. This was on account of the sound execution in the E&C division which reported a 21% revenue growth. The electrical and electronics (E&E) division also reported a robust 26% growth in revenue led by robust sales in the medium voltage switchgears. However, the machinery and industrial products (MIP) division was sluggish with a year-on-year (Y-o-Y) fall of 3% in revenue owing to lower industrial off take. The others segment reported a strong 38% growth driven by integrated engineering.

OPM under pressure but better than our expectation: The overall operating profit margin (OPM) stood at 10.4%, higher than our expectation of 10% but lower than 10.6% reported in Q2FY2012. The margin was under pressure led by the cost input pressure as well as a sharp jump in the employee expense (33% growth Y-o-Y). The operating profit grew by a lower rate of 17% on a yearly basis. For FY2012, the management has revised the margin dip in the E&C division to 75-125 basis points on a yearly basis from the earlier guidance of 50-75 basis points.

Net profit up 15%: The depreciation charge increased by 40% on account of higher capital expenditure (capex) undertaken in recent times. The interest charges were subdued in spite of a higher debt mainly due to good mix of low cost foreign debt. Further, boosted by a low tax rate, the adjusted profit after tax (PAT) grew by 15% YoY, which was 9% higher than our expectation.

Order inflow modest: For the quarter, the order inflow was moderate at Rs 160.96 billion (down 21% YoY). The H1 order inflow also fell by 11% to Rs 322.86 billion. Moreover, the management has reduced its order intake growth guidance to 5% as against its earlier guidance of a 15-20% growth in the order backlog for FY2012. This implies a required run rate of Rs 500 billion plus of order inflow in H2 which looks a challenging task given the current slowdown in the economy. The company has an overall order book of around Rs 1,421.85 billion (up by 23% YoY). Of the total order book position, about 89% is from the domestic customers and the remaining 11% comprises overseas orders. Overseas orders` contribution to the overall order book increased sharply to 25% in the quarter from the past level of 10-15%.

Outlook and view: The Street was worried about L&T`s margins and order inflow. The company`s performance has been mixed on these parameters. While the margin has been decent for the quarter, trimming down of order inflow guidance today has further deep-rooted the concerns on future earnings growth. We are likely to downgrade our estimates to internalise the revised guidance. At the current levels, the stock is trading at 13.9x our FY2013 earnings estimates. We maintain our Buy rating and would soon come out with a detailed note taking a thorough account of the H1 results.

Accumulate Larsen & Toubro; target Rs 1,603

L&T reported mixed results in Q2FY12 (1) Sustained growth momentum on back of robust order backlog revenues up 21% y-o-y to Rs112.5 % marginally above estimates (2) Operating margins fell by 30 bps y-o-y to 10.4% (Vs estimate of 10.6%) - owing to change in revenue mix and rise in staff costs (3) Operating profit growth at 17% y-o-y to Rs11.5 % in line with estimates (4) However, net profit growth at 28% y-o-y to Rs8.0 % was above estimates attributed to higher other income (Rs3.6 % Vs estimate of Rs2.9 %).

Segment level E&C and E&E deliver while M&IP disappoints:

Engineering & Construction (E&C): Led by strong opening order backlog, E&C segment posted yet another quarter of strong performance. Revenues grew by 21% y-o-y to Rs97.2 % while EBIT margins declined 60 bps y-o-y to 10.6% - decline in margins attributed to cost inflation and change in revenue mix.

Electrical & Electronics (E&E) After 4 quarters of muted performance, E&E segment posted strong revenue growth at 26% y-o-y to Rs 8.5 % ahead of estimates. However, with sharp rise in raw material prices (largely copper and silver) EBIT margins continued to contract down 450 bps y-o-y to 8.4%.

Machinery & Industrial Products (M&IP): M&IP division performance was impacted by slowdown in industrial demand in general and in mining in particular. After posting strong growth for the past 5 quarters, revenues declined by 3% y-o-y to Rs6.8 %. EBIT margins also dropped by 90 bps y-o-y to 15.7%.

Secures orders worth Rs 161%. Down 21% y-o-y:

Order inflows remained subdued on back of continued delays and deferrals in order finalizations. Order inflows declined by 21% y-o-y during Q2FY12E to Rs161 %. Order inflows were led by Hydrocarbons (up 134% y-o-y on low base), while all the other sectors witnessed decline on y-o-y basis namely Infrastructure (-20% y-o-y), Power (-53%) and Process (-3%). Order book growth at 23% y-o-y to Rs 1,422 % though forward order book cover remains healthy at 3.2X FY11E revenues.

Lowered guidance - Order inflow growth at 5% and EBITDA margin decline 75-125 bps:

L&T retained its revenue growth guidance at 25% for FY12E on the back of a robust order backlog and stable execution thereof optimistic assumption with higher probability of downward revision in ensuing quarters. However it sharply revised down guidance for EBITDA margins and order inflows (1) Expects EBITDA margins to decline by 75-125 bps (Vs 50-75 bps earlier) change in revenue mix and sharp increase in raw material prices (2) Expects muted growth in order inflows at 5% (Vs erstwhile 15%) in view of 11% y-o-y decline in H1FY12, no signs of revival in investment spends and continued postponements in order finalizations.

The same already stands factored in our estimates:

We have already factored slowdown in order inflows & order execution and pressure on operating margins (the 2 principle concerns and risk to earnings) highlighted in our report Delusional optimism to reality dated 19 Oct`11. Consequently, EMKAY estimates are 7% and 6.7% lower than consensus estimates for FY12E and FY13E respectively.

Retain Accumulate rating:

At CMP, stock is trading at attractive valuations of 17.5X FY11E and 14.9X FY13E consolidated earnings of Rs76.2 and Rs89.6 per share. However, absence of re-rating catalysts and earnings downgrades cycle in the near- term remains a concern. We have an Accumulate rating with a target price to Rs1603 (@ 18.3X FY13E earnings).

Buy L&T; target of Rs 1510

L&T Ltd. has reported net profit of Rs 7461.50 million for the quarter ended on June 30, 2011 as against Rs 6661.70 million in the same quarter last year, an increase of 12.01%. It has reported net sales of Rs 94826.10 million for the quarter ended on June 30, 2011 as against Rs 78853.10 million in the same quarter last year, a rise of 20.26%. Total income grew by 20.55% to Rs 97787.90 million from Rs. 81120.70 million in the same quarter last year. During the quarter, it reported earnings of Rs 12.23 a share.

L&T’s Buildings & Factories Independent Company- part of its Construction Division has secured new orders worth Rs 4100 crore during first quarter of FY12 for construction of airport expansion, hospital, commercial, residential buildings including factories. L&T construction has secured new orders worth 1340 crore in the Building & Factories segment during the second quarter of FY12 for the construction of commercial & residential buildings including add-on orders from ongoing projects. L&T construction has secured another major order worth Rs 797 cr from a leading developer for the mixed use construction comprising predominantly of residential, including retail and commercial developments at Mumbai.

Larsen & Toubro Limited (L&T) is a technology, engineering, construction and manufacturing company. L&T is a technology-driven USD 11.7 billion company that infuses engineering with imagination. It is considered as one of the largest and most respected companies in India's private sector.

Larsen & Toubro Limited is the biggest legacy of two Danish Engineers, Henning Holck-Larsen and S.K. Toubro who built a world-class organization that is professionally managed and a leader in India's engineering and construction industry. Holck-Larsen and Toubro founded the partnership firm of L&T in 1938, which was converted into a limited company on February 7, 1946. Today, this has metamorphosed into one of India's biggest success stories. The company has grown to a large conglomerate spanning engineering and construction. ECC was conceived as Engineering Construction Corporation Limited in April 1944 and was incorporated as wholly owned subsidiary of Larsen & Toubro Limited. L&T's founders Holck - Larsen and Toubro laid the foundation for ECC. Today, L&T is one of India's biggest and best known industrial organizations with a reputation for technological excellence, high quality of products and services, and strong customer orientation. It is also taking steps to grow its international presence. L&T has an international presence, with a global spread of offices. A thrust on international business has seen overseas earnings grow significantly. It continues to grow its overseas manufacturing footprint, with facilities in China and the Gulf region. The company's businesses are supported by a wide marketing and distribution network, and have established a reputation for strong customer support.

At the current market price of Rs.1337.00, the stock is trading at 18.58 x FY12E and 16.71 x FY13E respectively. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.71.98 and Rs.80.02 respectively. Net Sales and Operating profit of the company are expected to grow at a CAGR of 14% and 6% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 10.50 x for FY12E and 9.49 x for FY13E. Price to Book Value of the stock is expected to be at 3.11 x and 2.63 x respectively for FY12E and FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 1510 for long term investment.

Buy Larsen & Toubro; target Rs 2,015

Power equipment, though focus area for L&T, contributes miniscule to near-term earnings estimates and attracts only 3% (Rs15-20 billion) of total capital employed of the company.

But, virtually not bagging any orders in 9X800 MW is negative for the power equipment business, since L&T was formidable contender in the race.

This could invite changes in the business strategy and could lower expectations of returns in the business venture.

At this juncture, L&T power business has adequate orders i.e. 5,940 MW Boilers and 7540 MW turbines with total value of Rs 127 billion for the 4,000 MW facilities at Hazira, Gujarat.

Also, L&T with its full-scale EPC capabilities in power plant stands fair chance for order wins in tendering from private utilities. We retain `Buy` rating with price target of Rs 2,015/Share.

Buy Larsen & Toubro; target of Rs 1,903

 L&T has an order book of > Rs 1.3 tn, lending good revenue visibility. L&T`s strong balance sheet, a sound execution engine, wide array of capabilities, integrated operations tailored to suit India`s infrastructure growth story and multiple, recurring value-unlocking triggers over the medium term lead us to place faith in this default India infrastructure story.

L&T had a well-capitalised balance sheet at a debt-equity ratio of 0.3x as of FY2011, despite having a strong portfolio of assets and having invested in future growth areas. We believe the key factors for the same are 1) high margins and 2) better working capital management.

`Buy` L&T with an SOTP target price of Rs 1,903:

L&T has outperformed the BSE Sensex by 10.2% over the last six months on the back of 1) strong quarterly performances; and 2) robust guidance for FY2012 for both revenue and order booking. Further, we have discounted margin pressure in our numbers. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs 1,903, which provides 17.4% upside from current levels. Hence, we recommend `Buy` on the stock.

Buy Larsen & Toubro (L&T); target of Rs 1,946

Larsen & Toubro`s (L&T) building and factories division has bagged orders aggregating to 13.40 billion from various clients during 2QFY2012. Orders adding up to 9.75 billion are for the construction of a mixed use commercial development and construction of the main civil works for an IT campus. Orders worth 2.03 billion and 1.62 billion are for construction of a residential tower and add-on orders from various clients for ongoing contracts respectively. With these order the outstanding order book stands at 1,375.12 billion (3.1 FY2011 revenues) providing revenue visibility.

Valuation:

At the CMP of 1,558, the stock is trading at 19.5 FY2013E earnings and 3.3 FY2013E P/BV, on a standalone basis. We have used the sum-of-the-parts (SOTP) methodology to value the company to capture all its business initiatives and investments/stakes in the different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to 1,946, which provides 24.9% upside from current levels. We recommend a `Buy` rating on the stock.

Buy Larsen & Toubro; target Rs 1,946

Larsen & Toubro`s (L&T) building and factories division has bagged orders aggregating to 13.40 billion from various clients during 2QFY2012. Orders adding up to 9.75 billion are for the construction of a mixed use commercial development and construction of the main civil works for an IT campus. Orders worth 2.03 billion and 1.62 billion are for construction of a residential tower and add-on orders from various clients for ongoing contracts respectively. With these order the outstanding order book stands at 1,375.12 billion (3.1 FY2011 revenues) providing revenue visibility.

Valuation:

At the CMP of 1,558, the stock is trading at 19.5 FY2013E earnings and 3.3 FY2013E P/BV, on a standalone basis. We have used the sum-of-the-parts (SOTP) methodology to value the company to capture all its business initiatives and investments/stakes in the different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to 1,946, which provides 24.9% upside from current levels. We recommend a `Buy` rating on the stock.

Buy Larsen & Toubro; target Rs 1,911

Results in line led by higher treasury income: Larsen and Toubro (L&T)`s Q1FY2012 results were a mixed bag - the overall profit after tax (PAT) was in line with our expectation led by a boost in the unallocable corporate income even as the segmental margins remained under pressure. The company has indicated that the rise in this income was primarily due to a higher income from treasury operations and due to the favourable base effect on account of higher provision made and lower non segmental foreign exchange (forex) gain booked in Q1FY2011. The company made an overall adjusted forex gain of Rs 350 million during the quarter under the head of sales, administration and other expenses as compared to Rs 1.02 billion in Q1FY2011. Revenue-wise, its engineering and construction (E&C) and machinery and industrial products (MIP) divisions registered good growth on a yearly basis. The order inflow was modest for the quarter (up 3.6% year on year [YoY]) while the order backlog grew by 26.3% YoY to Rs 1,361.72 billion (the same was, however, flattish on a sequential basis).

Guidance maintained: The company has maintained its guidance of a Y-o-Y growth of 25% in revenue and 15% in order inflow for FY2012. The company has also indicated that in the current fiscal the margin could experience pressure of 50-75 basis points (in FY2011 the operating profit margin [OPM] stood at 11.7%) on account of an increase in the input cost.

Fine-tuned estimates: We have marginally fine-tuned our estimates, incorporating the annual report details and impending margin pressure. Largely, our standalone estimates for FY2012 and FY2013 have decreased by 5% (for each year) and our revised consolidated earnings per share (EPS) estimates stand at Rs 80.7 and Rs95.8 respectively. We expect the company`s earnings to grow at a compounded annual growth rate (CAGR) of 18.2% over the next two years.

Outlook and view: While the company reported robust results for the quarter, the achievement in the order inflow guidance would be highly subjective to uptick in infrastructure development activities in the country and the Middle East region. Nonetheless, maintenance of the robust growth guidance for the year reiterates the company`s confidence in its execution capabilities and bidding opportunities in the infrastructure sector. We have revised our sum of the parts (SOTP) target price to Rs1,911, incorporated the audited numbers from its annual report including those of its subsidiaries and have also accounted for the finance business holding`s initial public offering (IPO). At the current market price the stock is trading at 16.8x its FY2013 consolidated earnings estimates. We continue to believe that L&T is the best proxy play on India`s infrastructure growth theme and maintain our Buy rating on the stock.

L&T - the best proxy play on India`s infra growth theme

Results in line led by higher treasury income: Larsen and Toubro (L&T)`s Q1FY2012 results were a mixed bag - the overall profit after tax (PAT) was in line with our expectation led by a boost in the unallocable corporate income even as the segmental margins remained under pressure. The company has indicated that the rise in this income was primarily due to a higher income from treasury operations and due to the favourable base effect on account of higher provision made and lower non segmental foreign exchange (forex) gain booked in Q1FY2011. The company made an overall adjusted forex gain of Rs 350 million during the quarter under the head of sales, administration and other expenses as compared to Rs 1.02 billion in Q1FY2011. Revenue-wise, its engineering and construction (E&C) and machinery and industrial products (MIP) divisions registered good growth on a yearly basis. The order inflow was modest for the quarter (up 3.6% year on year [YoY]) while the order backlog grew by 26.3% YoY to Rs 1,361.72 billion (the same was, however, flattish on a sequential basis).

Guidance maintained: The company has maintained its guidance of a Y-o-Y growth of 25% in revenue and 15% in order inflow for FY2012. The company has also indicated that in the current fiscal the margin could experience pressure of 50-75 basis points (in FY2011 the operating profit margin [OPM] stood at 11.7%) on account of an increase in the input cost.

Fine-tuned estimates: We have marginally fine-tuned our estimates, incorporating the annual report details and impending margin pressure. Largely, our standalone estimates for FY2012 and FY2013 have decreased by 5% (for each year) and our revised consolidated earnings per share (EPS) estimates stand at Rs 80.7 and Rs95.8 respectively. We expect the company`s earnings to grow at a compounded annual growth rate (CAGR) of 18.2% over the next two years.

Outlook and view: While the company reported robust results for the quarter, the achievement in the order inflow guidance would be highly subjective to uptick in infrastructure development activities in the country and the Middle East region. Nonetheless, maintenance of the robust growth guidance for the year reiterates the company`s confidence in its execution capabilities and bidding opportunities in the infrastructure sector. We have revised our sum of the parts (SOTP) target price to Rs1,911, incorporated the audited numbers from its annual report including those of its subsidiaries and have also accounted for the finance business holding`s initial public offering (IPO). At the current market price the stock is trading at 16.8x its FY2013 consolidated earnings estimates. We continue to believe that L&T is the best proxy play on India`s infrastructure growth theme and maintain our Buy rating on the stock.

Buy L&T; target of Rs 2127

Larsen & Toubro's (LT) 1QFY12 results were impressive. PAT grew 12% YoY, above our estimate, and revenue grew 21% YoY, marginally below our estimate. EBITDA margins were 11.9% (against our estimate of 10.9%), down 95bp. Order intake grew 4% YoY, in line with expectations. LT maintained FY12 order intake and revenue guidance of 15% and 25% respectively. We expect LT to post 25% earnings CAGR over FY11-13.

LT's 1QFY12 results were impressive and broadly in line with our expectations. PAT was INR7.5b, up 12% YoY, above our estimate of INR7b driven by sales growth. LT posted revenue of INR94.8b (up 21%YoY), marginally below our estimate of INR97.7b (up 25%YoY). EBITDA margins were 11.9%, down 95bp YoY, but better than our estimate of 10.9%, helped by forex gains and lower project provisioning. Order intake was INR162b, up 4% YoY, in line with our expectations. The order book was INR1,362b, up 26% YoY and 5% QoQ. Revenues at the E&C and MIP segments grew 23% and 26% respectively in 1QFY12 and revenue at the electrical business grew 1%, indicating a slowdown in the product segment. Despite a meaningful decline in EBIT margin across segments (partly due to a high base in 1QFY11 for the E&C business), LT limited the EBITDA margin decline to 97bp YoY due to a forex gain of INR350m and lower project-related provisioning.

LT maintained its FY12 outlook, growth in order intake by 15% and revenue by 25%. LT expects to maintain EBITDA margin at the FY11 level, with the possibility of a 50-60bp decline. However, given the uncertain business environment, LT will review guidance if necessary at the end of 2QFY12. We expect LT to post 25% earnings CAGR over FY11-13. Our FY12E consolidated EPS is INR86 (up 23% YoY) and INR109 in FY13E (up 28% YoY). Maintain Buy with an SOTP-based target price of INR2,127. We value LT standalone at 20x FY13E earnings and subsidiaries at INR 484 per share. A key risk is sustained rise in inertest rates, which can impact LT's order inflows and hence valuations.

Buy L&T; target Rs. 2011

Larsen and Toubro (L&T)`s Q1FY2012 results were a mixed bag the overall profit after tax (PAT) was in line with our expectation led by a boost in the unallocable corporate income even as the segmental margins remained under pressure.

Revenue-wise, its engineering and construction (E&C) division outperformed all expectations by registering a year-on-year (Y-o-Y) growth of 22.8%. The order inflow was modest for the quarter (up 3.6% year on year [YoY]) while the order backlog grew by 26.3% YoY to Rs 1,361.72 billion (the same was, however, flattish on sequential basis).

The company has maintained its guidance of Y-o-Y growth of 25% in revenues and 15% in order inflows for FY2012. The company has also indicated that in the current fiscal the margin could experience pressure of 50-75 basis points (in FY2011 the OPM stood at 11.7%) on account of an increase in the input cost.

L&T reported a strong rise in its revenues (stand-alone) for the quarter. The revenue growth was in line with our expectation of a 21.9% Y-o-Y increase in the revenue. This was mainly on account of a pick-up in the revenue of the E&C segment. The E&C division reported a 22.8% growth in its revenue which was marginally below our expectation of a 25% Y-o-Y revenue growth. The electrical and electronics (E&E) division reported flattish revenue for the same period. The machinery and industrial products (MIP) division reported a robust growth of 26.3% YoY for the quarter.

The company has significantly regrouped its numbers under many heads. The overall operating profit margin (OPM) was robust at 11.9%, higher than our expectation of 11% but lower than 12.8% in Q1FY2011. Margin pressure was visible on account of higher input and employee costs. If we look at the segmental margins, the margin of almost every segment was under severe pressure. The biggest booster to the overall margin was the unallocable corporate income (which primarily includes interest income, dividends and the profit on sale of investments), which was higher by 179.7% YoY at Rs 2,091 million. The company has indicated that the rise in this income was primarily due to higher income from treasury operations and forex gain.

Led by higher depreciation and interest, the adjusted PAT reported a 12% Y-o-Y growth, which was in line with our expectation. The order inflow for L&T was modest during the quarter, coming in at Rs 161.9 billion (up 3.6% YoY) due to order booking in the E&C division (Rs 144.16 billion). The order inflow for the quarter was largely driven by the orders in infrastructure and power sector. Currently, L&T`s order backlog stands at Rs 1,361.72 billion (up 26.3% YoY but flattish on a sequential basis). The company`s management has indicated that the ordering environment still witness the deferral of award decisions and stiff competition.

Outlook & View: While the company reported robust results for the quarter, the achievement of the order inflow guidance would be highly subjective to uptick in infrastructure development activities in the country and the Middle East region. We are also concerned on the margin pressure in view of rising input costs, particularly metal prices. Also, depreciation would also jump sharply in view of the recent capex undertaken by the company. Nonetheless, maintenance of the robust growth guidance for the year reiterates the company`s confidence in its execution capabilities and bidding pipeline in the infrastructure sector. We would now be revisiting our estimates, our target price and recommendation on the stock and would soon come out with a detailed note on the same.

Buy L&T; target of Rs 1880

Larsen and Toubro (L&T) has given a breakout from the downward sloping resistance line on the hourly chart for the first time since in last one week. On Friday, the stock sustained above its downward sloping trend line, suggesting strength in the counter and any move past Rs 1830 is likely to accentuate buying momentum in the near term. RSI too has bounced back from the support levels of 50 which favors risk reward ratio on the bullish side. Also, the stock had been consolidating above its 200- DMA since last two weeks, signifying strength in Friday’s up move. We recommend high risk traders to buy the stock above Rs 1835 with stop loss of Rs 1815 for target of Rs 1880.

Accumulate Larsen & Toubro`s; target Rs 2,030

Larsen & Toubro`s (L&T) power transmission and distribution division has bagged a major international EPC order worth Rs 12.1 billion from Qatar General Electricity and Water Corporation. The order involves supply and construction of 13 extra high voltage substations in Qatar. The estimated construction period is 18-26 months. This is the single largest order for L&T's power transmission and distribution operations in GCC countries. With this order, the outstanding order book of the company stands at Rs 1,412.17 billion (3.2x FY2011 revenue), providing good revenue visibility.

At the CMP of Rs 1,798, the stock is trading at 21.8x FY2013E earnings and 3.7x FY2013E P/BV on a standalone basis. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and m-cap basis, our target price works out to Rs 2,030, which provides 12.9% upside from current levels. We recommend `Accumulate` on the stock.

Buy Larsen; target of Rs 1870

Larsen & Tourbo (L&T), after hitting an interim peak of Rs 1,868 on last Thursday trading session, stock price is witnessing consolidation which is likely to extend towards Rs 1,814 in the near term. Although short term charts continues to remain on bullish any decline in the counter towards Rs 1814 becomes good buying opportunity with formation of e leg of flag pattern. The stock has already been trading comfortably above the 200 DMA which is placed at Rs 1,786 which becomes its medium term support. We advise buying stock in the range of Rs 1,805-1,810 with stop loss of Rs 1,780 for target of Rs 1,870. (Duration 5 days).

Sell Larsen; target Rs 1710

Larsen and Toubro (L&T), prices are trading on mixed note with weak bias holding below the resistance formed by the shown high-high trend line and the Fibonacci retracement over the last few sessions. The 14-day RSI is turning down near the overbought territory while the Stochastic (14/3/3) has made a bearish crossover and is easing out of same. As prices have also pulled back from the upper Bollinger Band (21/2) and are moving sideways a break below Monday’s low of Rs 1780 could trigger profit booking and invite correction towards the 200-day EMA near Rs 1710 and then Rs 1640 levels. On the higher side, any gains are likely to face stiff resistance within the Rs 1820/1850 zone. Only a close above it will negate the expected weakness and extend the positive tone. Sell L&T only below Rs 1780 with closing stop of Rs 1840 for a possible target of Rs 1710/1680.

Buy Larsen & Toubro; target of Rs 2,015

Factoring unannounced order wins and remaining portfion of Hyderabad Metro, total order wins would be Rs 170 billion to Rs 210 billion

Typically, L&T does not announce small or insignifant order wins and restricts to large and critical order wins. Historically, order wins remaining unannounced totals Rs 50-60 billion for the quarter and Rs 150 billion on annual basis. Hence, factoring similar unannounced order wins and inclusion of part portion of Hyderabad Metro (remaining portion after adjusting for Rs 60 billion factored in FY11, Metro Coaches and Interest Capitalization), total order wins is expected to be Rs 170 billion (excluding Hyderabad Metro) and Rs 210 billion (including Hyderabad Metro).

So far achieved desired run-rate to meet FY12E order inflow target of Rs 920 billion

It is evident that, L&T would report order inflow growth of 9%-35% in Q1FY12 on yoy basis - on worst-best case basis. Considering FY12E target order inflow of Rs 920 billion, order wins in Q1FY12 are quite satisfactory being approximately 18%-23% of the FY12E order inflows and in-line with the desired run-rate.

Any Earnings and/or Ratings remain back-ended, Remain Positive with target price of Rs 2,015/Share

Impending risk of negative surprise and deviation from management guidance (on order inflows - important Catalyst) remains addressed on temporary basis. Hence, any Earnings and/or Ratings changes remains back-ended towards Q4FY12E, since the Q1FY12 progress remains satisfactory and raises confidence of investors. Other catalyst like unlocking value of L&T Finance through IPO is yet to play out. Thus, L&T is best placed to remain Market Outperformer in medium term with price target of Rs 2,015/Share.

Buy L&T; target of Rs 2,033

Larsen & Toubro`s (L&T) metallurgical and material division has bagged orders aggregating to 16.10 billion from Tata Steel, India Bulls Power and other customers in 1QFY2012. The order from Tata Steel involves construction along with detailed engineering and supply of balance of plant for four new coke oven batteries and by-product plants. The estimated construction period is two and half years. Another order from India Bulls Power worth 2.40 billion is for civil and structural works for coal handling plants and ash plants. With these orders, the outstanding order book stands at 1,400.07 billion (3.2 FY2011 revenue), which provides good revenue visibility.

At the CMP of 1,739, the stock is trading at 21.0 FY2013E earnings and 3.5 FY2013E P/BV on a standalone basis. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and m-cap basis, our target price works out to 2,033, which provides 16.9% upside from current levels. We recommend `Buy` on the stock.

Buy Larsen & Toubro; target Rs 2,011

After the announcement of its Q4FY2011 results, Larsen and Toubro (L&T) has so far announced order inflow of Rs 96.76 billion with the real estate sector leading with a 42% contribution. The orders from the road sector contributed 27%, metallurgy 14%, power transmission and distribution (T&D) 14% with the balance orders coming from the coal-handling sector. Of these, the T&D orders have been bagged from countries in the Gulf region.

These order announcements have been very encouraging as compared to that in Q1FY2011 when it had announced the bagging of orders worth Rs 47.73 billion post-Q4FY2010 results (the actual order inflow during Q1FY2011 stood at Rs156.26 billion). Please note that the orders bagged during a quarter were historically much higher than the orders announced. Accordingly, we feel that the company is on track to achieve the required quarterly run rate of at least Rs 170 billion for Q1FY2012.

The company has indicated a robust year-on-year (Y-o-Y) growth of 15-20% in order inflow for FY2012 on the back of the bids in the pipeline and the opportunities available in the hydrocarbon, power and infrastructure space. Please note that the company does not announce all its orders and only large orders are notified through public announcements.

We remain positive on L&T as it is the best proxy for India`s infrastructure growth story. Moreover, the company`s order flows are likely to improve significantly in the coming months on the back of bulk tendering by National Thermal Power Corporation and improving traction in order flow from the hydrocarbon and metallurgy space. However, the key risks for the company remain the high interest rate and slowdown in infrastructure spending. Nonetheless, the current valuation at 17.4x FY2013 estimate largely factors in these concerns as the same is still much lower than its five-years average one-year forward multiple of 23x. Hence, we maintain our `Buy` rating on the stock with a price target of Rs 2,011.

Buy on L&T; target of Rs 2,015

Typically, L&T does not announce small or insignifant order wins and restricts to large and critical order wins. Historically, order wins remaining unannounced totals Rs 50-60 billion for the quarter and Rs 150 billion on annual basis. Hence, factoring similar unannounced order wins and inclusion of part portion of Hyderabad Metro (remaining portion after adjusting for Rs 60 billion factored in FY11, Metro Coaches and Interest Capitalization), total order wins is expected to be Rs 170 billion (excluding Hyderabad Metro) and Rs 210 billion (including Hyderabad Metro).

So far achieved desired run-rate to meet FY12E order inflow target of Rs 920 billion

It is evident that, L&T would report order inflow growth of 9%-35% in Q1FY12 on yoy basis - on worst-best case basis. Considering FY12E target order inflow of Rs 920 billion, order wins in Q1FY12 are quite satisfactory being approximately 18%-23% of the FY12E order inflows and in-line with the desired run-rate.

Any Earnings and/or Ratings remain back-ended, Remain Positive with target price of Rs 2,015/Share

Impending risk of negative surprise and deviation from management guidance (on order inflows - important Catalyst) remains addressed on temporary basis. Hence, any Earnings and/or Ratings changes remains back-ended towards Q4FY12E, since the Q1FY12 progress remains satisfactory and raises confidence of investors. Other catalyst like unlocking value of L&T Finance through IPO is yet to play out. Thus, L&T is best placed to remain Market Outperformer in medium term with price target of Rs 2,015/Share.

Buy Larsen & Toubro target Rs 2,033

Larsen & Toubro (L&T) has bagged EPC orders aggregating to Rs 13.66 billion from Gulf countries. The first order worth Rs 5.97 billion from Saudi Electricity Company involves construction of the 225km of 380kV transmission line project.

The company has secured two EPC orders from UAE for the construction of voltage substations and cabling work worth Rs 4.22 billion and Rs 750 million, respectively. Two EPC orders have been received from Qatar and Muscat, which involve construction of substation and cabling work and are worth Rs 1.85 billion and Rs 870 million, respectively. Construction period for the projects is 9 to 24 months. With these orders, the outstanding order book stands at Rs 1,316.97 billion (3x FY2011 revenue), which provides good revenue visibility.

At the CMP of Rs 1,646, the stock is trading at 19.9x FY2013E earnings and 3.4x FY2013E P/BV on a standalone basis. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and market capitalisation basis, our target price works out to Rs 2,033, which provides 23.5% upside from current levels. We recommend `Buy` on the stock.

Buy Larsen and Toubro; target Rs 2,033

We believe L&T is in an enviable position, given the apparent shortage of good-quality constructors in India. The company is in a position to choose its contracts and negotiate for price variation clauses. L&T`s strong balance sheet, a sound execution engine, wide array of capabilities, integrated operations tailored to suit India`s infrastructure growth story and multiple, recurring value-unlocking triggers over the medium term lead us to place faith in this default infrastructure growth story of India. L&T has an order book of  Rs 1.3 trillion, lending revenue visibility. With signs of pick-up in execution, management has guided for an improving scenario, and we also believe that most of the pieces are falling in place for the company.

L&T has a well-capitalised balance sheet, at a debt-equity ratio of 0.3x as of FY2011, in spite of having a strong portfolio of assets and having invested in future growth areas. We believe the key factors for the same are 1) high margins and 2) better working capital management.

Outlook and valuation - Negatives priced Outlook and valuation - Negatives priced in: We believe after its fall from peaks of Rs 2,200 levels, L&T stock is trading at attractive levels. While the absolute PE might look rich, it is well deserved in our opinion, with L&T being the largest and most diversified play in our India construction universe. At the CMP of Rs 1,706, the stock is trading at 20.6x FY2013E earnings and 3.5x FY2013E P/BV on a standalone basis. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and Mcap basis, our fair value works out to Rs 2,033, which provides 19.2% upside from current levels. Hence, we recommend Buy on the stock.

Buy Larsen & Toubro; target Rs 2,011

Larsen and Toubro (L&T)`s Q4FY2011 results were lower than our as well as the Street`s expectations with the adjusted net profit growing just 9% year on year (YoY). However, the order inflow was robust, registering a year-on-year (Y-o-Y) growth of 27% to Rs 302.81 billion, outperforming market expectations and taking the total order book to a new high of Rs 1,302.17 billion. The company has also given a robust Y-o-Y growth guidance of 25% in revenues and 15-20% in order inflows for FY2012.

L&T has reported a subdued rise in its revenues (stand-alone) for Q4FY2011 which was lower than our expectation of a 23% Y-o-Y growth. This was mainly on account of a lower than expected pick up in revenue of the engineering and construction (E&C) segment (up 12.8% YoY). This sluggishness was also partly because of an unfavorable base effect. The electrical and electronics (E&E) division reported a flattish revenue on a yearly basis due to sluggish project awards. The machinery and industrial products (MIP) division reported a robust growth of 29.9% YoY, led by a robust growth in the construction and mining business.

The operating margins were robust at 13.5%, which were in line as compared to 13.8% in Q4FY2010. This has been possible as the effect of a rise in the employee cost and administration cost was offset by the containment in raw material cost, led by its efficient project execution. Moreover, the margins improved in spite of two exceptional items included in Q4FY2011 results - 1) A warranty provision of Rs200 crore created for a large order executed and 2) Rs100 crore for marked to market foreign exchange (forex) losses. The company has indicated that the current fiscal year could see a margin pressure of 50-100 basis points (FY2011 operating profit margin [OPM] stands at 11.7%) on account of an increase in input costs.

The interest cost was surprisingly flattish at Rs 1,362 million, led by an exceptionally efficient working capital management. Further, led by higher depreciation and tax, the adjusted profit after tax (PAT) growth was limited to 9.1% on a Y-o-Y basis, which was lower than expectation. There was a change in the accounting policy with respect to depreciation, which resulted in an increased depreciation charge in Q4FY2011 (up 103% YoY). The company has also reported an extraordinary item of Rs 2,268 million which represents gains on divestment of part-stakes in subsidiary / associate companies during the quarter.

The order inflow for L&T remained robust during the quarter, coming in at Rs 302.81 billion (up by 27% YoY) due to a good order booking in the E&C division (up 29% YoY). During the quarter, the order inflow was robust due to booking of the Hyderabad metro project (worth Rs 59 billion) and an engineering, procurement and construction (EPC) contract from a steel major for blast furnace. The company also has orders (worth Rs 70 billion) in the building and factories segment which were unannounced due to client confidentiality agreements. Geographically, order booking from the Middle East picked up and formed 8% of the order inflow for FY2011. L&T`s current order backlog stands at Rs 1,302.17 billion (3x FY2011 revenue), of which Rs128,000 crore constitutes orders from the E&C segment. Its management has reiterated its 15-20% Y-o-Y growth guidance on a strong base of Rs 797.69 billion for FY2012 in view of various bids in the pipeline and opportunities in various segments like roads, minerals and metals, hydrocarbon and power.

The management has indicated that the working capital cycle may see some pressure in FY2012 on account of rising inflation and tightening liquidity situation. We have fine tuned our estimates in view of FY2011 results and the management outlook. Largely, our standalone estimates for FY2012 and FY2013 have decreased by 6% and 8% to Rs70.9 and Rs 81.9 respectively. Our revised consolidated earning per share (EPS) estimates stand at Rs 88 and Rs 102.8 respectively. We expect the company`s earnings to grow at a compounded annual growth rate (CAGR) of 17.3% over the next two years. The company has also denied the possibility of a sell off of its E&E division but is however open for any strategic partnership with other global players.

While the Street was worried about the company`s margins and interest cost amid the rising interest rate scenario, the company outperformed on these parameters. We continue to believe that L&T is the best proxy play on India`s infrastructure growth theme and maintain our Buy rating on the stock. We have also revised our sum of the part (SOTP) target price to Rs 2,011, where we have downgraded our target multiple for its core business from 21x to 20x and have also rolled over our target multiple to FY2013 estimates. At the current market price the stock is trading at 16.8x its FY2012 consolidated estimates.

Buy Larsen & Toubro; price target of Rs 2,015

Q4FY11 performance meets expectations - APAT up 9% yoy to Rs 14.6 billion. Stable EBITDA margins at 15.2% - positive surprise. Clocks order inflows at Rs 304 billion, against all Odds and positive surprise but misses target; Order book at Rs1.3 tn (3X sales) - sets tone for continued momentum in FY12E. Upbeat management guidance for FY12E - order inflow growth at 15-20% (pick-up in hydrocarbons, process), revenue growth at 25%; pressure on EBITDA mgn (50-75 bps).

We maintain our FY12E earnings of Rs 82.1 a share in view of upbeat guidance shared by L&T. We introduce FY13E earnings of Rs100.6/Share. At CMP, the stock is trading attractively at 19.4X FY12E consolidated earnings. With robust order backlog and strong order inflows until May 2011, L&T remains on strong footing. Most likely, L&T would retain the growth momentum in FY12E - in order Inflows, led by good order pipeline in infrastructure, hydrocarbons, power and process and revenue booking - led by strong order backlog. We retain our `BUY` rating with price target of Rs 2,015.

Buy Larsen & Toubro; target Rs 2,034

Larsen & Toubro (L&T) has bagged an offshore process platform order in KG basin worth Rs 14.5 billion from Gujarat State Petroleum Corporation (GSPC). This is a second contract received by L&T from GSPC. Last year, L&T had received GSPC`s first offshore wellhead platform contract for the development of Deen Dayal West field in KG basin. With this order, the outstanding order book stands at Rs 1,209.32 billion (2.7x FY2011E revenue), thereby providing revenue visibility.

At the CMP of Rs 1,506, the stock is trading at 18.1x FY2013E earnings and 3.1x FY2013E P/BV on a standalone basis. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs 2,034, which provides 35.1% upside from current levels. We recommend `Buy` on the stock.

Accumulate Larsen & Toubro; target Rs 1,778

Revenues tad lower, EBITDA margins stable: Larsen and Toubro (L&T) reported a 12.7% YoY growth in net sales from its core business at Rs 151 billion in Q4FY11 and ended the year with a growth of 18.6%. Sales growth, especially E&C (which accounts for 86% of the revenues) was slower (13% Q4FY11) on account of deferment of certain projects by clients on the back of political and economical uncertainty. EBITDA margins remained healthy during the quarter at 13.5% and were maintained YoY at 12%. Margins could have been better as there were some increased costs in the quarter to the extent of Rs 3 billion. Adjusted PAT for Q4FY11 stood close to Rs 15 billion (12.2% YoY growth) and for FY11 was at Rs 36.7 billion (a growth of 15% YoY).

Sectoral performance: For Q4FY11, E&C division registered a revenue growth of 3%, with 15.8% EBITDA margins (stable YoY). Also, the MIP business was good and posted 25% YoY growth, with 22.5% EBITDA margins (stable YoY). E&E business registered a sales de-growth of 5% and EBITDA margin stood at 25.1% (850bps improvement YoY). For the full year, revenue growth and EBITDA margins were mainly in line with the Q4FY11 numbers.

Q4FY11 order inflow, surprises: L&T, in Q4FY11, has bagged orders worth Rs 303 billion, a 27% YoY and 127% QoQ growth. The upswing (but not reported) orders were mainly pertaining to process, part booking of Hyderabad Metro and buildings segments (details on next page).

Updates: Current debt of L&T stands at Rs 71 billion and support to subsidiaries in FY11 stood at Rs 30 billion. L&T group reported an adjusted PAT of Rs 42.4 billion a growth of 12% YoY.

Valuations: We roll our estimates forward to FY13E and factor in some changes in core business. We maintain our `Accumulate` rating on the stock.

Accumulate Larsen & Toubro; target Rs 1,778

Larsen and Toubro (L&T) reported a 12.7% YoY growth in net sales from its core business at Rs 151 billion in Q4FY11 and ended the year with a growth of 18.6%. Sales growth, especially E&C (which accounts for 86% of the revenues) was slower (13% Q4FY11) on account of deferment of certain projects by clients on the back of political and economical uncertainty. EBITDA margins remained healthy during the quarter at 13.5% and were maintained YoY at 12%. Margins could have been better as there were some increased costs in the quarter to the extent of Rs 3 billion. Adjusted PAT for Q4FY11 stood close to Rs 15 billion (12.2% YoY growth) and for FY11 was at Rs 36.7 billion (a growth of 15% YoY).

For Q4FY11, E&C division registered a revenue growth of 3%, with 15.8% EBITDA margins (stable YoY). Also, the MIP business was good and posted 25% YoY growth, with 22.5% EBITDA margins (stable YoY). E&E business registered a sales de-growth of 5% and EBITDA margin stood at 25.1% (850bps improvement YoY). For the full year, revenue growth and EBITDA margins were mainly in line with the Q4FY11 numbers.

L&T, in Q4FY11, has bagged orders worth Rs 303 billion, a 27% YoY and 127% QoQ growth. The upswing (but not reported) orders were mainly pertaining to process, part booking of Hyderabad Metro and buildings segments (details on next page).

Current debt of L&T stands at Rs 71 billion and support to subsidiaries in FY11 stood at Rs 30 billion. L&T group reported an adjusted PAT of Rs 42.4 billion a growth of 12% YoY.

We roll our estimates forward to FY13E and factor in some changes in core business. We maintain our `Accumulate` rating on the stock.

Buy Larsen & Toubro; target Rs 2,015

Net sales growth at 18% yoy to Rs 160.4 billion. Segment-wise revenue growth at 8.8% yoy in E&C to Rs 132 billion, 8.5% yoy in E&E to Rs 10.7 billion, 8.0% in M&IP to Rs 7.4 billion and 69% yoy in Others to Rs 1.7 billion. 140 bps yoy drop in EBIDTA margins to 13.6% - attributed to unfavorable revenue mix and high base of Q4FY10. 6.4% yoy growth in APAT to Rs 14.2 billion - due to 48% yoy drop in other income. Expect L&T to miss order inflow guidance by significant margin (high asking rate at Rs 393 billion). Revenue and order inflow guidance for FY12E and order execution risk will be key monitorable.

Buy Larsen & Toubro; target Rs 1,955

Results below expectations but order inflow and guidance ahead of expectations: Larsen and Toubro (L&T)`s Q4FY2011 results were lower than our expectations mainly on account of a sluggish performance by its engineering and construction (E&C) division. However, the order inflow was robust, registering a year-on-year (Y-o-Y) growth of 27% to Rs 302.81 billion, outperforming the market`s expectations. The company has also given a robust Y-o-Y growth guidance of 25% in revenues and 15-20% in order inflow for FY2012.

The company has reported a subdued rise in its revenues (stand-alone) for Q4FY2011; the revenue growth of 23% YoY was lower than our expectation. This was mainly on account of a slow pick up in the revenues of the E&C segment. The E&C division reported a 12.8% growth in the revenues, which was below our and the Street`s expectations. The electrical & electronics (E&E) division reported flattish revenues. The machinery and industrial products (MIP) division reported a robust growth of 29.9% YoY.

The operating margin was robust at 13.5%, which is in line with our expectation of 13.6% and as compared to 13.8% in Q4FY2010. This has been possible as the effect of the rise in employee costs and administration costs was offset by the containment in the raw material cost. The company has indicated that the current fiscal year could see a margin pressure of 50-100 basis points (FY2011 operating profit margin [OPM] stands at 11.7%) on account of an increase in the input cost.

The interest cost was surprisingly flattish at Rs 1,362 million. Further, higher depreciation and tax costs limited the adjusted profit after tax (PAT) growth to 9.1% on a Y-o-Y basis, which was lower than our expectation. The company has reported an extraordinary item of Rs 2,268 million which represents the gains accrued on divestment of part-stakes in subsidiary / associate companies during the quarter.

The order inflow for L&T remained robust during the quarter, coming in at Rs 302.81 billion (up by 27% YoY), due to good order booking in the E&C division (up 29% YoY). L&T`s current order backlog stands at Rs 1,302.17 billion, out of which Rs 1,280 billion constitutes orders from the E&C segment. The management has given 15-20% YoY growth guidance in order inflow for the coming year.

While the Street was worried about the company`s margins and interest cost amid the rising interest rate scenario, the company has outperformed on these parameters. However, the margins could remain under pressure in view of the rising input costs, particularly metal prices. Also, depreciation would also jump sharply in view of the recent capital expenditure (capex) undertaken by the company. Nonetheless, robust order booking for the year indicates continuance of the strong growth trajectory for the company. We maintain our Buy rating on the stock and would come out with a detailed note post the analyst meet.

Buy Larsen & Toubro; target Rs 1,965

Based on the company`s announcement during the fourth quarter, the total orders announced by the company have been to the tune of Rs 33.8 billion, which is indicative of continuing weakness in order wins. The company does not announce all the orders that it receives during a quarter hence the actual order intake during the quarter is typically 35-50% higher. However, there has been a lull in order announcements since Feb 2011.

Target price maintained at Rs 1,965 (Rs 2,051 earlier) L&T is trading at 21x and 18.2x FY11 and FY12 earnings respectively. We maintain BUY with a revised price target of Rs 1,965.

Buy Larsen and Toubro; target of Rs 1831

Lack of decision making by the government and an uncertain policy environment is impacting infrastructure spending, and hence, the company's order intake. We believe that L&T will miss its FY11 order intake guidance of 25% growth, and report a decline in order intake during the year.

We expect order intake to improve in FY12, on the back of few large orders including Hyderabad Metro (EPC order of Rs9b-10b), a few expected large orders from the Middle-East (in hydrocarbon sector) and likely acceleration in orders from power T&D and infrastructure sectors. Success in NTPC bulk tender (boiler package, potential order of Rs60b) can boost power sector intake.

Order intake from the power and infrastructure sectors has grown 13% YoY and 41% YoY respectively in the first nine months of FY11. However, order intake from the hydrocarbons sector has declined 62% YoY during 9MFY11. The hydrocarbons sector also has seen intensifying completion, with new entrants like Essar Services and Punj Lloyd bidding very competitively.

The company expects strong ordering from the segment in the next few quarters, including a few successes in the Middle-East. L&T's EBITDA margin has expanded by nearly 200bp since FY07 due to strong revenue growth and better product mix. We believe maintaining margins will be challenge going forward due to intensifying competition, rising commodity prices and ongoing training and development programs on new projects. We expect EBITDA margin to shrink 60bp in FY12 and stabilize at around 11.5% in FY13 (v/s 12.3% in FY11). Also, the company's net working capital has improved to 10% of sales in FY10 from 14% in FY09. We expect working capital to trend towards the normal 15% in FY11 and 20% in FY12-13, driven by increasing share of public sector and power BTG orders (20% of total) in the order book.

We expect L&T to report revenue CAGR of 22% and PAT CAGR of 19% through FY11-13. Our consolidated EPS estimates stand at Rs71 (+15%) for FY11, Rs82 (+15%) for FY12, and Rs101 (+24%) for FY13.

The stock is down 30% since its yearly high and is now trading at reasonable valuations. We maintain Buy with a revised price target of Rs 1831 (earlier Rs 1907).

Sell L&T; target of Rs 1570

Prices rallied well above the resistance level of Rs 1683 initially however sold off and settled in negative territory finally last session. Weekly MACD (12/26/9) is still below its signal line indicating that medium-term down trend is still in force while the daily Stochastic (14/3/3) has just made a bearish crossover in the overbought territory.

Hence a break below the support at Rs 1638 could signal the conclusion of prevailing positive tone and invite weakness towards supports at Rs 1600 and then Rs 1575 subsequently. Also prices have been closing well off the day’s highs over last few sessions indicating selling pressure at higher levels which would be supportive for the said argument. Only a strong up move above resistance zone of Rs 1683/1700 could negate possibility of correction and extend the prevailing positive tone. Sell L&T initially below Rs 1638 and then on any rise to Rs 1654 with a target of Rs 1570 and closing stop of Rs 1680.

Buy Larsen; target of Rs 1600

Larsen and Toubro has been trading mixed holding above the short term rising trend line support over the last few sessions. Oscillators in the weekly chart continue to move sideways in the negative zone implying that downtrend from November peak is still in force. However from the price action on daily charts, the downtrend appears to be losing momentum. This coupled with the potential positive divergence in daily weekly RSI (14) could lead to a short-term recovery in prices however a decisive break above Rs 1530/1540 is required to confirm the same and turn the sentiment positive towards Rs 1600/1630 subsequently. On the downside, any further weakness is likely to find good support near Rs 1480/1461. Buy L&T initially above Rs 1535 and then on any dips to Rs 1515 with a target of Rs 1600/1630 and a closing stop loss of Rs 1480.

Buy L&T; target of Rs 1635/1650

Larsen & Toubro (L&T), prices are trading mixed holding above the low-low trend line support near 1500 over the last couple of sessions. Oscillators in the weekly chart continue to move sideways in the negative zone implying that the medium-term downtrend from November peak is still in force. On the daily time-frame however, the downtrend appears to be losing momentum. Hence an early break above the resistance at Rs 1565 could lead to a short-term recovery in prices which finds next resistance near Rs 1598 and then Rs 1635 subsequently.

On the downside, support is seen at Rs 1528 and then at Rs 1506. Only an early break below the latter could aggravate the weakness in prices negating the expected recovery. Buy L&T only above Rs 1565 with a target of Rs 1635/1650 and a stop loss of Rs 1525.