1QFY2014 Result Update | Infrastructure

July 22, 2013

Larsen & Toubro
Performance Highlights
Quarterly highlights - Standalone
Y/E March (` cr) Net sales Op. profit Reported PAT 1QFY14 12,555 1,071 756 1QFY13 11,955 1,087 902 4QFY13 20,294 2,451 1,769 % chg (yoy) 5.0 (1.4) (16.2) % chg (qoq) (38.1) (56.3) (57.3)

BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others Abs. (%) Sensex LT 3m 6.0 (8.1) 1yr 17.5 (2.7) 36.8 19.9 43.2 3yr 11.2 (30.2) Infrastructure 83,420 9,483 1.2 1146/872 327,309 2 20,159 6,032 LART.BO LT@IN

`902 `1,128
12 Months

Source: Company, Angel Research

Larsen and Toubro (L&T) posted a disappointing set of numbers for 1QFY2014, which were below our and street expectation on both, revenue and profitability fronts. This was mainly on the back of lower-than-expected execution and abysmal operating performance. As of 1QFY2014, L&T’s order book stands at `1,65,393cr indicating a growth of 8.0% yoy. Order inflow for the quarter jumped by 28.4% to `25,159cr mainly driven by major orders bagged in the infrastructure (70%) and hydrocarbon (11%) segments. Performance falls short of estimates: The top-line came in at `12,555cr, registering a growth of 5.0% yoy for the quarter which was lower than our and street estimates of `13,100cr and `13,487cr respectively. The slow execution was mainly on the back of decline in order book in the power and metal segment, lower growth in product business and non-linear project execution. On the EBITDA front, the company reported a yoy dip of 56bp to 8.5%, against our expectation of 10.5%, owing to lower-than-expected execution and high construction and sub-contracting costs. On the bottom-line front, L&T reported a yoy decline of 16.2% to `756cr which was lower than our estimate of `911cr. This was mainly on the back of lower-than-expected execution and poor operating performance. Outlook and valuation: For FY2014, the Management has given a guidance of 15-17% growth in revenue and 20% growth in order inflow and +/- 50bp change in EBITDA margin. We believe given its robust order backlog, healthy order inflows during the past few quarters, and a strong execution capability, the company is well placed to achieve its guidance on the revenue front. However, it would be difficult to achieve a 20% growth on the order inflow front, considering the challenging macro environment. We believe L&T is best placed to benefit from a gradual recovery in the capex cycle, given its diverse exposure to sectors and a strong balance sheet. We maintain our Buy rating on the stock with a target price of `1,128. Key financials (Standalone)
Y/E March (`cr) Net Sales % chg Adj.Net Profit % chg EBITDA (%) FDEPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x) OB/Sales (x) Order Inflows % chg FY2012 52,545 20.7 3,937 19.7 11.8 42.7 21.1 3.3 16.7 17.3 1.2 10.1 2.8 70,574 (11.5) FY2013A 60,373 14.9 4,132 4.9 10.5 44.8 20.2 2.9 15.2 15.2 1.0 9.8 2.5 88,035 24.7 FY2014E 68,396 13.3 4,521 9.4 10.0 49.0 18.4 2.6 14.9 15.0 0.9 9.3 2.5 98,687 12.1 FY2015E 77,435 13.2 5,096 12.7 10.0 55.2 16.3 2.4 15.3 15.5 0.8 8.3 2.4 111,432 12.9

Viral Shah
022-39357800 Ext: 6842 Viralk.shah@angelbroking.com

Source: Company, Angel Research

Please refer to important disclosures at the end of this report

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Larsen & Toubro | 1QFY2014 Result Update

Exhibit 1: Quarterly performance (Standalone)
Y/E March (` cr) Net Sales Total Expenditure Operating Profit OPM (%) Interest and Financial chgs Depreciation Non Operating Income Nonrecurring items Profit Before tax Tax Net Profit before MI PAT (%) Minority Interest (MI) Adjusted net profit after MI Adj. PAT (%) Adj. FDEPS
Source: Company, Angel Research

1QFY14 12,555 11,484 1,071 8.5 245 210 473 1,089 332 756 6.0 756 6.0 8.2

1QFY13 11,955 10,868 1,087 9.1 228 192 606 (38) 1,234 370 864 7.2 902 7.5 9.8

4QFY13 20,294 17,843 2,451 12.1 281 222 374 19 2,341 553 1,788 8.8 1,769 8.7 19.2

% chg (yoy) 5.0 5.7 (1.4) (56)bp 7.4 9.6 (22.0) (100.0) (11.8) (10.3) (12.5) (116)bp (16.2) (148)bp (16.2)

% chg (qoq) (38.1) (35.6) (56.3) (354)bp (12.7) (5.4) 26.2 (100.0) (53.5) (39.9) (57.7) (279)bp (57.3) (270)bp (57.3)

FY2013 60,873 54,466 6,407 10.5 982 818 1,851 248 6,705 1,794 4,911 8.1 4,132 6.8 44.8

FY2012 53,171 46,888 6,283 11.8 666 699 1,338 55 6,310 1,854 4,457 8.4 3,937 7.4 42.7

% chg (yoy) 14.5 16.2 2.0 (129)bp 47.5 17.0 38.3 350.1 0.8 (3.2) 10.2 (31)bp 4.9 (62)bp 4.9

Exhibit 2: 1QFY2014 Actual vs Estimates
(` cr) Net Sales EBITDA Reported PAT
Source: Company, Angel Research

Estimates 13,100 1,375 911

Actual 12,555 1,071 756

Variation (%) (4.2) (22.1) (17.0)

Key highlights of the concall
„ Net Working Capital (NWC) continues to remain weak at 17.3% of sales compared to 15.4% in March 2013. The Management believes that would be in the range of 16-20% of sales going forward in light of the current scenario. L&T’s Management is fairly confident of achieving a 20% growth in order inflows and 15-17% growth on the revenue front. The company is eyeing infrastructure (including roads, metro rails, buildings, DFC and airports), hydrocarbon and power T&D projects for drawing orders. Further, L&T has removed slow moving orders worth `6,000cr from the order book in 1QFY2014, which mainly pertain to the ship building segment. Despite heightened competitive intensity, the Management has clarified that it has enough levers at its disposal to ensure that the current EBITDA margin (+/-50bp) is maintained FY2014. L&T has given a capex guidance of `1,000cr for FY2014. It has also infused equity investments of `6,000cr till date into subsidiaries and developmental projects.

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July 22, 2013

2

Larsen & Toubro | 1QFY2014 Result Update

Muted growth in top-line
The top-line came in at `12,555cr, registering a growth of 5.0% yoy for the quarter, which is lower than our and street estimates of `13,100cr and `13,487cr respectively. The slow execution was mainly on the back of decline in order book in the power and metal segment, lower growth in product business and non-linear project execution.

Company maintains its aggressive order inflow guidance
The Management has reiterated its guidance of a 15-17% growth in revenue and 20% growth in order inflow for FY2014. The guidance is mainly based on (a) high share of exports in both order inflows and revenues (power T&D and hydrocarbon) and (b) continued momentum in the infrastructure segment (building and factories, railways, airports, etc). L&T has secure orders worth `25,159cr during 1QFY2014, taking the order book to `1,65,393cr (a growth of 8.0% yoy). Order inflows were mainly driven by major orders bagged in the infrastructure (70%) and hydrocarbon (11%) segments. The Management is confident of achieving an order inflow in excess of `100,000cr during FY2014. We believe the company can achieve its guidance on the revenue front, given its robust order backlog. However it would be difficult to achieve a 20% growth on the order inflow front, considering the challenging macro environment.

Exhibit 3: Muted revenue growth
25,000 20,000 15,000 10,000 11,245 13,984 18,461 11,955 5,000 0
2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14

Exhibit 4: Robust order inflows momentum continues
30.0 25.0 30,000 25,000 20,000 15,000 10,000 16,096 17,129 21,159 19,594 20,967 19,545 27,929 5,000 0
2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14

26.1 21.4 23.5 22.4 17.3

28.2 21.0

30.3 14.1

32.0

28.4

40.0 30.0 20.0 10.0 0.0 (10.0)

20.0 15.0

10.3 13,195 15,429

9.9 10.0 20,294 5.0 12,555 5.0 0.0 (21.3) 25,159

(20.0) (30.0) (40.0)

(30.2)

Sales (` cr, LHS)

Growth (yoy %, RHS)

Order Inflow

Growth (yoy %, RHS)

Source: Company, Angel Research

Source: Company, Angel Research

July 22, 2013

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Larsen & Toubro | 1QFY2014 Result Update

EBITDA margin posts a decline, below our estimate
The company reported an EBITDAM of 8.5%, a yoy dip of 56bp, against our expectation of 10.5%. The performance was below our expectation mainly on account of (a) muted revenue growth, (b) higher-than-anticipated staff cost owing to increased employee base and annual salary revision and (c) higher construction expenses. Going ahead, despite heightened competitive intensity, the Management has clarified that it has enough levers at its disposal to ensure that the current EBITDA margin (+/-50bp) is maintained for FY2014 and believes that EBITDAM should be looked at on a yearly basis rather than on a quarterly basis owing to volatility based on job mix.

Abysmal operating performance dents PAT growth
On the bottom line front, L&T reported a yoy decline of 16.2% to `756cr which was lower than our estimate of `911cr. This was mainly on the back of lower-than-expected execution and abysmal operating performance.

Exhibit 5: EBITDA margin disappoints
3,000 2,500 10.4 2,000 1,500 1,000 1,174.1 1,367.6 2,561 1,087 1,406 1,475 2,451 1,071 500 0
2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14

Exhibit 6: Lower EBITDAM dents profitability
16.0 12.1 14.0 12.0 8.5 10.0 8.0 6.0 4.0 2.0 0.0 2,000 1,800 1,600 1,400 1,200 1,000 800 600 1,865 1,029 1,769 709 772 902 871 200 0
2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14

13.9 10.7 9.1

12.0 10.1 7.5 6.3 6.6 5.5 6.7 10.0 8.7 8.0 6.0 6.0 4.0 756 2.0 0.0 PAT (` cr, LHS) PATM (%, RHS)

9.8

9.6

400

EBITDA (`cr, LHS)

EBITDAM (%, RHS)

Source: Company, Angel Research

Source: Company, Angel Research

July 22, 2013

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Larsen & Toubro | 1QFY2014 Result Update

Segmental performance
Engineering and construction (E&C): The E&C segment which comprises of infrastructure, hydrocarbon, power, metallurgical and metal handling and heavy engineering (contributing ~90% to the company’s gross revenue) witnessed strong traction in order inflows. The E&C segment recorded a revenue growth of 5.4% yoy to `11,450cr in 1QFY2014 mainly driven by strong revenue growth in infrastructure (23%) and hydrocarbon segment (23%). Machinery and industrial products (MIP): The MIP segment continued to witness pressure from persistent headwinds, ie sluggish demand in construction and mining sectors, and increased competition. The MIP segment reported revenues of `539cr in 1QFY2014, an increase of 6.5% yoy, mainly driven by increase in export of industrial valves. The EBITDA margin came in at 13.8% (16.1% in 1QFY2013) in 1QFY2014 and was impacted by increased input costs and intense competition. Electrical and electronics (E&E): On the back of slowdown in investment and industrial activity and delay in clearances from customers, the E&E segment’s revenue growth was muted at 4.5% yoy to `794cr. The EBIT margin came in at 8.8%, registering a growth of 354bp on a yoy basis.

Exhibit 7: Segmental performance
Y/E March (` cr) Revenues Engg & Const. (E&C) Mach. & Ind. Products (MIP) Electrical & Electronics (E&E) Others Intersegment revenue EBIT Engg & Const. Mach. & Ind. Products Electrical & Electronics Others Intersegment margins EBIT (%) Engg & Const. Mach. & Ind. Products Electrical & Electronics Others Capital Employed Engg & Const. Mach. & Ind. Products Electrical & Electronics Others Unallocable
Source: Company, Angel Research

1QFY14 12,704 11,450 539 794 319 398 1,147 1,024 63 70 (11) 9.0 8.9 11.7 8.8 (3.5) 40,997 16,585 416 1,429 1,101 21,466

1QFY13 12,078 10,866 507 760 375 430 1,210 1,028 68 40 73 10.0 9.5 13.5 5.3 19.4 37,437 12,953 486 1,335 1,121 21,542

4QFY13 20,485 18,392 745 1,117 381 150 2,421 2,065 105 146 105 11.8 11.2 14.1 13.1 27.6 38,219 14,971 596 1,281 850 20,520

% chg (yoy) 5.2 5.4 6.5 4.5 (14.9) (7.2) (5.2) (0.4) (7.3) 74.2 (115.4) 0.0 (131)bp (47) bp (98)bp 354bp (3225)bp 9.5 28.0 (14.5) 7.0 (1.8) (0.3)

% chg (qoq) (38.0) (37.7) (27.6) (28.9) (16.1) 166.2 (52.6) (50.4) (39.7) (51.8) (110.6) 0.0 (315)bp (228)bp (235)bp (421)bp (3113)bp 7.3 10.8 (30.2) 11.5 29.5 4.6

July 22, 2013

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Larsen & Toubro | 1QFY2014 Result Update

Subsidiary’s performance
L&T InfoTech registers healthy performance
L&T InfoTech, the company’s technology subsidiary, reported a healthy performance for 1QFY2014, registering a 27% yoy growth in revenue to `1,112cr. On the profitability front, the subsidiary’s PAT grew by 38% yoy to `182cr in 1QFY2014. PATM came in at a healthy 16.4% for the quarter, mainly on account of better operational efficiency and currency gains.

Order book analysis
During the quarter, the company reported a healthy order inflow of `25,159cr (up 28.4% yoy) against our expectation of `30,000cr. Infrastructure and hydrocarbon segments were the major contributors with a share of 70% and 11% respectively. For 1QFY2014, ~14% of the orders came from the international market. As of 1QFY2014, L&T stands tall on an order backlog of `1,65,393cr, indicating a growth of 8.0%. L&T’s order book is majorly dominated by the infra (67%) and power (10%) segments. Process (9%), hydrocarbon (6%) and others (8%) constitute the remaining part of the order book. The company has given a guidance of 20% for order booking in FY2014, which is above our expectation considering the challenging macro environment. Client wise, 35% of L&T’s outstanding order book comes from the public sector and 53% comes from the private sector. Captive work orders account for the balance 12%. Notably, there has been a drop in the share of public sector orders in the past few quarters. However, the Management expects good quantum of government orders going forward.

Exhibit 8: Robust order inflows
(` cr) 30,000 25,000 20,000 15,000 10,000 5,000 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14

Exhibit 9: Order book composition (`1,65,393cr)
27,929 25,159 (` cr) 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14

21,159 17,129

19,594

20,967

19,545

Process

Hydrocarbon

Power

Infrastructure

Others

Total

Process

Hydrocarbon

Power

Infrastructure

Others

Source: Company, Angel Research

Source: Company, Angel Research

July 22, 2013

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Larsen & Toubro | 1QFY2014 Result Update

Outlook and valuation
We recommend Buy with a target price of `1,128
We believe L&T will continue to occupy a unique position in the Indian E&C space as a diversified and large engineering play, with exposure to areas ranging from power, defense, nuclear and equipment, in spite of short-term concerns. At the current market price of `902, the stock is trading at 16.3x FY2015E earnings and 2.4x FY2015E P/BV on a standalone basis. We have used the sumof-the-parts (SOTP) methodology to value the company to capture all its business initiatives and investments/stakes in subsidiaries and other 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 `1,128. We maintain our Buy rating on the stock. It may be noted here that the L&T stock has historically traded at a premium to the BSE Sensex. At our SOTP target price, the stock would trade at 15x FY2015E standalone adjusted EPS of `55.2, which is at a premium of 8% over Angel’s FY2015E Sensex P/E multiple of 14x and lower than the historical premium commanded by L&T over the BSE Sensex.

Exhibit 10: L&T – Parent historic P/E band
120% 100% 80% 60% 40% 20% 0% Jan-10 Jan-11 Jan-12 Nov-09 Nov-10 Nov-11 May-09 May-10 May-11 May-12 Nov-12 Jan-13 May-13 Mar-10 Mar-11 Mar-12 Mar-13 Sep-09 Sep-10 Sep-11 Sep-12 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13

L&T Premium/(Discount) to Sensex

7YEAR AVG

5YEAR AVG

3YEAR AVG

Source: Company, Angel Research

On one-year forward P/E basis, historically L&T has traded at an average P/E of 25.4x, 23.3x and 23.4x over the past seven, five and three years, respectively. Thus, our implied target P/E multiple of 20.4x is way below the historical average to factor in the prevailing challenging business environment.

July 22, 2013

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Larsen & Toubro | 1QFY2014 Result Update

Exhibit 11: L&T – Parent one-year forward P/E band
60.0 50.0 40.0 30.0 20.0 10.0 0.0 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Jun-13

P/E

7YEAR AVG

5YEAR AVG

3YEAR AVG

Source: Company, Angel Research

Exhibit 12: Derivation of SOTP-based target price for L&T (FY2015E)
Business Segment L&T- Parent Infrastructure Subsidiaries IDPL (stake - 97.5%) Key Subsidiaries - Services L&T Infotech L&T Finance Key Subsidiaries - Manufacturing Tractor Engineers Associate Companies L&T MHI Boilers and Turbines (51%) Other Subsidiaries Satyam Stake Other Investments Total
Source: Company, Angel Research

Methodology P/E P/BV P/E Mcap Basis P/E P/E P/E Mcap P/BV

Remarks 15x FY2015E Earnings L&T acq. 2.36% stake of IDFC at Rs118cr in 1QFY11 10.0x FY2015E Earnings 20% holding company discount 5x FY2015E Earnings 5x FY2015E Earnings 5x FY2015E Earnings 20% holding company discount 1x FY2015E Book Value, Mcap

` cr 76,442 5,850 5,850 16,080 7,406 8,674 3,327 98 2,000 1,230 2,451 254 2,197 104,149

`/share % to TP 828 63 63 174 80 94 36 1 22 13 27 3 24 1,128 73.4 5.6 5.6 15.4 7.1 8.3 3.2 0.1 1.9 1.2 2.4 0.2 2.1 100

Exhibit 13: Key assumptions (` cr)
FY2010 Order Inflow Revenue Order Backlog (Y/E) OB/Sales (x) 69,572 36,675 100,239 2.7 FY2011 79,769 43,540 130,217 3.0 FY2012 70,574 52,545 145,723 2.8 FY2013 88,035 60,373 153,604 2.5 FY2014E 98,687 68,396 168,258 2.5 FY2015E 111,432 77,435 183,718 2.4

Source: Company, Angel Research

July 22, 2013

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Larsen & Toubro | 1QFY2014 Result Update

Exhibit 14: Angel EPS forecast vs consensus
Angel Forecast FY2014E FY2015E
Source: Company, Angel Research

Bloomberg Consensus 55.2 61.453

Variation (%) (11.3) (10.2)

49.0 55.2

Investment arguments
„ Best stock to play the Indian infrastructure theme: 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.

Company background
L&T - the largest Indian infrastructure conglomerate - is present across almost all the infrastructure segments and is at the forefront of the Indian infra growth story. Over the years, the company has diversified across various segments to encash the untapped infra opportunity, not only in India but in other geographies as well, and has an excellent track record of achieving the same. Over the past 10 years (FY2003-13), L&T has reported a CAGR of 23.0% and 28.5% in its top-line and bottom-line, respectively.

July 22, 2013

9

Larsen & Toubro | 1QFY2014 Result Update

Exhibit 15: Recommendation summary
Company ABL CCCL IRB Infra ITNL IVRCL JP Assoc. L&T NCC Punj Lloyd Sadbhav Simplex In. Unity Infra CMP 52 9 94 145 15 49 26 30 87 67 24 TP Rating FY13 84 Buy - Neutral 157 Buy 230 Buy 29 Buy 90 Buy 42 Buy 139 Buy 131 Buy 41 Buy 1,853 1,931 3,687 6,645 3,759 Top-line (` cr) FY14E 1,928 2,281 3,997 7,444 5,673 FY15E 2,234 2,492 4,312 8,041 5,892 9.8 13.6 8.1 10.0 8.4 8.2 13.2 10.1 12.2 22.8 9.2 7.1 53.3 (3.3) 16.7 26.8 (3.3) 2.2 44.8 2.4 (0.2) 0.9 10.8 12.5 EPS (`) 59.9 0.7 15.7 29.8 1.4 2.5 49.0 2.7 0.5 5.9 11.9 11.0 73.9 2.0 16.6 32.1 1.8 2.9 55.2 3.6 0.9 6.7 18.7 11.5 17.7 (0.3) 9.4 13.8 11.1 22.0 177.2 31.9 (4.0) 1.0 (2.6) 5.6 5.4 22.4 20.2 10.6 100.7 6.2 1.9 P/E 0.9 12.5 6.0 4.9 10.5 19.5 18.4 9.7 60.0 14.8 5.6 2.2 0.7 4.2 5.7 4.5 8.3 17.3 16.3 7.1 32.7 13.1 3.6 2.1 OB/ 2.3 2.2 2.4 2.2 4.8 2.5 3.2 1.9 5.6 2.7 1.6 CAGR (%) FY13 FY14E FY15E CAGR (%) FY13 FY14E FY15E Sales(x)

13,358 14,850 15,631 60,873 68,946 78,040 5,725 1,811 5,897 2,040 6,167 2,462 6,308 2,146 6,945 2,731 7,033 2,339

902 1,128 Buy

- Neutral 11,717 12,954 14,740

Source: Company, Angel Research

Exhibit 16: SOTP break-up
Company ` ABL CCCL IRB Infra ITNL IVRCL JP Assoc. L&T NCC Punj Lloyd Sadbhav Simplex In. Unity Infra 29 16 45 80 9 24 828 23 64 47 131 35 Core Const. % to TP 35 100 29 35 31 27 73 55 100 33 100 85 ` 23 Real Estate % to TP 25 ` 55 112 120 7 93 6 Road BOT % to TP 65 71 52 17 67 15 Invst. In Subsidiaries ` 20 300 % to TP 69 27 ` 30 43 12 Others % to TP 13 48 29 Total ` 84 16 157 230 29 90 1,128 42 64 139 131 41

Source: Company, Angel Research

July 22, 2013

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Larsen & Toubro | 1QFY2014 Result Update

Profit & loss statement (Standalone)
Y/E March (` cr) Gross sales Less: Excise duty Net Sales Other operating income Total operating income % chg Total Expenditure Net Raw Materials Other Mfg costs Personnel Other EBITDA % chg (% of Net Sales) Depreciation & Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (incl pft from Ass/JV) (% of PBT) Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Less: Minority interest (MI) Prior period items PAT after MI (reported) ADJ. PAT (excl. div from Subs) % chg (% of Net Sales) Basic EPS (`) (Reported) Fully Diluted Adj. EPS (`) % chg

FY2010 FY2011 FY2012 FY2013A FY2014E FY2015E 36,675 43,540 52,545 360 9.1 366 18.6 625 21.1 37,035 43,906 53,171 32,259 38,266 46,888 15,740 10,675 11,175 8,721 2,379 3,845 4,776 21.8 12.9 416 4,360 20.6 11.9 505 2,026 34.5 5,881 49.2 135.7 6,016 27.3 4,376 4,376 4,151 54.1 11.2 47.4 45.0 54.1 9,396 10,747 2,830 5,295 5,640 18.1 12.8 599 5,040 15.6 11.6 619 1,147 20.6 5,569 (5.3) 332.9 5,901 32.9 3,958 3,958 3,289 (20.8) 7.5 42.9 35.6 (20.8) 3,666 8,772 6,283 11.4 11.8 699 5,583 10.8 10.6 666 1,338 21.4 6,255 12.3 55.0 6,310 29.4 4,457 4,457 3,937 19.7 7.4 48.3 42.7 19.7 60,373 500 60,873 14.5 54,466 12,028 14,472 4,436 14,581 8,948 6,407 2.0 10.5 818 5,589 0.1 9.3 982 1,851 28.7 6,457 3.2 247.6 6,705 1,794.0 26.8 4,911 4,911 4,132 4.9 6.8 53.2 44.8 4.9 68,396 550 68,946 13.3 62,051 14,479 17,236 5,102 16,547 8,687 6,895 7.6 10.0 912 5,983 7.1 8.7 1,027 2,038 29.1 6,994 8.3 6,994 1,871.6 26.8 5,123 5,123 4,521 9.4 6.6 55.5 49.0 9.4 77,435 605 78,040 13.2 70,250 16,388 19,510 5,867 18,730 9,755 7,790 13.0 10.0 995 6,795 13.6 8.8 1,137 2,230 28.3 7,888 12.8 7,888 2,110.7 26.8 5,777 5,777 5,096 12.7 6.5 62.6 55.2 12.7

1,574 10,070 12,527

1,640.9 1,943.6 1,853.8

July 22, 2013

11

Larsen & Toubro | 1QFY2014 Result Update

Balance sheet (Standalone)
Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Share App Money - warrants Reserves & Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Inventories Sundry Debtors Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 7,290 1,799 5,492 874 8,957 10,536 2,312 6,644 771 2,931 7,605 759 11,572 3,504 8,067 835 16,103 47,169 2,064 22,613 1,456 9,163 11,873 33,955 13,214 38,219 13,072 4,143 8,929 918 17,603 52,735 2,380 25,689 1,279 9,605 13,781 38,424 14,311 41,761 14,572 4,839 9,733 1,010 19,103 58,756 2,695 29,078 1,146 10,612 15,226 42,463 16,294 46,140 120 25 122 122 123 29,020 29,143 8,834 242 38,219 185 31,500 31,685 9,834 242 41,761 185 34,879 35,063 10,834 242 46,140 FY2010 FY2011 FY2012 FY2013A FY2014E FY2015E

18,166 21,724 25,101 18,312 21,846 25,223 6,801 77 7,161 263 9,896 133

25,190 29,271 35,252

13,705 14,685 15,872 26,395 35,010 43,457 1,415 1,432 6,036 1,577 1,730 8,225 1,777 1,905 9,128 11,158 12,428 18,730

6,353 11,049 11,918 21,277 27,839 32,441 5,119 7,170 11,016 -

25,190 29,271 35,252

July 22, 2013

12

Larsen & Toubro | 1QFY2014 Result Update

Cash flow statement (Standalone)
Y/E March (` cr) Profit before tax Depreciation Change in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations (Inc.)/ Dec. in Fixed Assets (Inc.)/ Dec. in Investments Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY2010 FY2011 FY2012 FY2013A FY2014E FY2015E 6,016 322 1,143 (2,026) (1,641) 3,815 (1,494) (5,442) 2,026 (4,909) 28 245 (717) 2,194 1,750 657 775 1,432 5,901 514 (1,753) (1,147) (1,944) 1,571 (1,564) (979) 1,147 (1,396) (24) 360 (863) 650 123 298 1,432 1,730 6,310 619 (3,671) (1,338) (1,854) 66 (1,567) (1,187) 1,338 (1,416) 1 2,735 (996) (215) 1,524 175 1,730 1,905 6,705 573 (2,647) (1,851) (1,794) 986 (1,111) (231) 1,851 508 1 (1,062) (1,112) 230 (1,943) (450) 1,905 1,456 6,994 638 (1,273) (2,038) (1,872) 2,450 (1,583) (1,500) 2,038 (1,045) 62 1,000 (1,145) (1,497) (1,581) (176) 1,456 1,279 7,888 697 (2,117) (2,230) (2,111) 2,127 (1,592) (1,500) 2,230 (862) 1,000 (2,040) (359) (1,399) (134) 1,279 1,146

July 22, 2013

13

Larsen & Toubro | 1QFY2014 Result Update

Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) Wcap cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage 0.3 1.1 8.6 0.2 1.0 8.1 0.3 1.3 8.4 0.3 1.2 5.7 0.3 1.2 5.8 0.3 1.2 6.0 5.8 14 104 192 229 5.4 12 98 213 242 5.5 12 107 217 257 5.5 12 124 207 262 5.6 12 128 196 257 5.6 12 128 193 255 19.7 21.7 27.0 18.5 20.3 16.4 17.3 18.8 16.7 15.2 16.3 15.2 15.0 15.9 14.9 15.5 16.3 15.3 11.9 72.7 1.7 15.1 5.5 0.4 18.7 11.6 67.1 1.7 13.2 5.9 0.3 15.1 10.6 70.6 1.7 13.0 5.5 0.3 15.1 9.3 73.2 1.7 11.7 7.7 0.3 12.8 8.7 73.2 1.8 11.3 8.1 0.3 12.2 8.8 73.2 1.8 11.6 8.1 0.3 12.6 45.0 45.0 49.5 8.2 195.3 35.6 35.6 42.1 9.6 236.7 42.7 42.7 50.2 10.9 273.2 44.8 44.8 53.6 11.0 315.7 49.0 49.0 58.9 19.6 343.2 55.2 55.2 66.0 16.5 379.8 20.1 18.2 4.6 0.9 1.6 12.7 2.4 25.3 21.4 3.8 1.1 1.4 10.8 2.1 21.1 18.0 3.3 1.2 1.2 10.1 1.8 20.2 16.8 2.9 1.2 1.0 9.8 1.6 18.4 15.3 2.6 2.2 0.9 9.3 1.5 16.3 13.7 2.4 1.8 0.8 8.3 1.4 FY2010 FY2011 FY2012 FY2013A FY2014E FY2015E

July 22, 2013

14

Larsen & Toubro | 1QFY2014 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Pvt. Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Pvt. Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Pvt. Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

L&T No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

July 22, 2013

15

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