sprog Value Research Stock Advisor - Larsen & Toubro Value Research Stock Advisor LARSEN & TOUBRO LTD. Construction | Infrastructure Premium Coverage 53 times in 15 years The infrastructure behemoth will reap the rewards of India’s capital investment push. Pending orders as on 10 FY2018 were 3.9 times standalone TTM operating revenues and still pouring in. Clever redeployment of capital to more profitable businesses will result in higher margins. Falling interest rates could be the icing on the cake. MOHIT KHANNA + 27 October 2017 Why we like L&T Ihe company's annual order intake is equal to nearly half of the government's infrastructure spending. ‘This ratio was as high as 62 per cent in 2010 and, after a slowdown in the last few years, is once again moving towards that level. The Government itself is a major L&T customer. Its infrastructure budget is rising, moving up to 14 per cent from 11 per cent in 2010. This has caused L&T’s order book to swell to as much as 3.9 times its TTM standalone operating revenues. Private capital spending, which has been a big contributor historically, is yet to be rekindled in a big way. ‘This gives us confidence that the current up cycle will be prolonged. hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 487sprog Value Research Stock Advisor - Larsen & Toubro L&T has several businesses, but infrastructure is its bread and butter, accounting for 60-70 per cent of its revenues. Thus, explosive growth here translates to turbo-charged profits for the company. This business isn’t easy to replicate, resting on sophisticated engineering expertise rather than mere cost competitiveness, which forms a powerful moat. The company tends to hire liberally from India’s famed IITs, for this very reason. Why you should invest in L&T now L&T is shedding its non-core businesses such as technology, unlocking a great deal of value in the process. It is deploying this capital and managerial attention in emerging money spinners like defence, urban transport and railways. The defence sector also happens to be a prime target for the government's ‘Make in India’ initiative, boding well for a domestic champion such as L&T. The company has delivered value at virtually an exponential rate. 1 lakh invested in L&T in 2000, is now 53 lakh, Background L&T can be best described as the company that builds India’s infrastructure. It was founded in 1938 in Mumbai by two Danish engineers, Henning Holck-Larsen and Soren Kristian Toubro. Due to import restrictions during the Second World War, L&T started to undertake engineering jobs and provide service facilities. Today, L&T operates across multiple different segments offering construction, infrastructure and engineering services. What is great about the company? L&T’s ‘design to deliver’ strategy involves in-house provision, execution, research and. maintenance of a project throughout the life-cycle. This makes it the only one of its kind in India, especially suited for fulfilling large, complex projects. Notably, L&T has capabilities across a very wide range of operations. It delivers technology, engineering, construction, manufacturing and financial services making it a ‘one stop shop’ for its customers. Its IT business is the seventh-largest in India. 1.&T has built the world’s largest coal gasifier (exported to China) and India’s first hydrocracker reactor. It also participated in building India’s first nuclear submarine, Arihant in 2009. ‘The sheer breadth of L&T’s operations is represented in the figure below. How big it can get? hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 2187sprog Value Research Stock Advisor - Larsen & Toubro L&T’s future growth largely Order inflow (Y17) Order book break-up (FY17) depends on India's %1,43,000 cr %2,61,300 cr need for infrastructure. Revenues are derived from the capital investment of governments (including the states and Centre) and private companies. Order backlog as on 10 Pr FY2018 was Rs. Infrastructure 8 Power Heavy Engineering © Electrical & Automation 2,62,900 crore, Hydrocarbon MServices = Others nearly 3.9x its TTM | Souree:L&T_ standalone operating revenues. Most of this backlog is attributed to the infrastructure sector and directly, to government-backed projects. The Government estimates that investments in India’s infrastructure (private and public taken together) will amount to $1.5 trillion over the next ten years. This is 25 times India’s annual budget for 2017-18 and roughly 75 per cent of India’s current GDP. The latest budget has increased capital investment by 25 per cent as compared to 9 per cent annually over the previous five years. ‘We expect project execution to pick up pace due to easing regulatory hurdles, faster dispute resolution and smoother environmental clearances. Additionally, we also expect the revival of private investment after a lull of four years. Many companies have successfully de-leveraged their balance sheets. Interest costs are declining and so is excess capacity. As the figure below shows, Private Capital Investment is at a multi-year bottom. Defence is another | Pvt. CAPEX Growth Vs IP Growth promising growth driver. Last year L&T won a Rs.4500 crore defence contract in partnership with Samsung to supply a 100 artillery guns. ‘This was the first time Indian -50 government FYOL 02 03 04 05 06 07 08 09 10 11 42 outsourced artillery gun production to the private sector. The deal also has a follow-on clause and the order size could potentially double if needed. L&T has also announced a 51:49 joint venture with Europe's MBDA wh = IP Growth 50 hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 387sprog Value Research Stock Advisor - Larsen & Toubro Missile Systems. The ]V will design, develop, manufacture and supply missile and missile systems to the Indian government. Experts estimates total defence orders up for grab to be around Rs.2,21,000 crore. over the next few years. L&T expects to win approximately Rs.40,000 crore or 18 per cent of this pie !!. Management & Business L&T is a professionally run company with no promoter holding. The Life Corporation of India is its largest shareholder with a 16 per cent stake. S.N. Subrahmanyan (who is 55 years old) became L&T’s Chairman in October 2017. Mr. Subrahmanyan, just like previous Chairman, A.M. Naik, also commenced his professional career with L&T in 1984 as a project planning engineer. He has played a crucial role in securing and managing EPC Engineering, Procurement and Construction) contracts for the construction of four major international airports in India at Bengaluru, Hyderabad, Delhi and Mumbai. He is also directly managing the mandate to build the tallest statue in the world - the Statue of Unity - and the development of the ‘Dedicated Freight Corridors’ that will realign the dynamics of railway freight movement. It is thus fair to say that the L&T succession is in good hands. How has it managed upheavals? L&T was always professionally-run with no promoter holding. This makes it vulnerable to corporate takeovers. Takeover attempts were made by Manu Chhabria in 1987, the Ambani family in the 1990s, and by Kumar Mangalam Birla's Grasim Industries in 2001 (The Ambanis sold their 10 per cent stake to Birla). Grasim was L&T’s competitor in the cement business. L&T’s then Chairman A.M. Naik responded to the challenge by approaching major shareholders such as LIC and L&T’s employees. Naik convinced L&T’s employees to create a trust to buy up to 12 per cent of the company, thereby effectively fortifying the company from future takeovers. He then persuaded Grasim to drop its bid and sell its stake in L&T to that trust. In return, L&T sold its cement division to Grasim, which has now renamed it UltraTech Cement. Efficiency - What does the company do with its cash? L&T’s financial statements also include the figures for L&T Finance holdings, which distorts the overall financial picture. To adjust for this, we have decided to focus only on the standalone results of L&T, which covers its core infrastructure and construction business. The recent past (before the order pick-up in the last two years) have not been good in terms of new business inflow and ease of execution. As a result, L&T’s revenues and net profits largely remained flat over the last five years. However it maintained average EBITDA (Earnings before Interest, Taxes, Depreciation and Amortisation) and net profit margins at 15 per cent and 9 per cent respectively. Over the last five years (till March 2017), L&T standalone generated Rs.15,728 crore in operating cash flow and Rs. $30 crore from equity issuance adding up to a total of Rs.16,257 crore. It reinvested 26 per cent, returned 44 per cent back to the shareholders by way of dividends and retains nearly 50 per cent on its books by way of cash and investments. This higher level of investment actually represents gains on the investments. hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 4187sprog Value Research Stock Advisor - Larsen & Toubro Over the past five years, the return on each unit of its capital (ROCE) was 18 per cent. After adjusting this figure for debt and taxes, it translated into a healthy return of 15 per cent for shareholders (Return on Equity or ROE). A pick-up in order execution should further improve ROE. Valuation L&T’s stock is currently trading at 25.1 times the consolidated earnings, which is slightly lower than its five year median P/E of about 25.5 times. Valuations reflects the huge order backlog, increasing margins and improved order visibility. Worries + Delay in the revival of private sector capital investment. + Slowdown in Government's infrastructure spending. References [1] L&T hopes to bag defence contracts worth Rs 40,000 cr, The Hindu Business Line, 7 September 2017 Disclosure: Mohit Khanna did not own shares in L&T, L&T Finance, Grasim Industries or Ultratech Cement as on the date of publication of this report. Independent Advisors LLP and its associates did not own shares in L&T, LAT Finance, Grasim Industries ar Ultratech Cement as on the date of publication of this report. ‘To view the latest stock holdings of the current Value Research Stock Advisor team, click here, hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 557sprog Value Research Stock Advisor - Larsen & Toubro L&T: Risk Score (23/30) The results of our individual tests and their combined result. Simply put, the Score Lower the score you find here, the riskier the stock. 23/30 MOHIT KHANNA + 27** October 2017 Company / Business Are the company's earnings before tax more than Rs 50 cr in the last twelve months? Yes, as per the latest standalone trailing twelve months [Ending June 2017] data its profit before tax was Rs.6,743 crore Will the company be able to scale up its business? Yes, the company operates 10 distinct segments in infrastructure, construction and heavy engineering. Each of them has immense expansion opportunities both domestically and internationally. Does the company have recognizable brand/s, truly valued by its customers? Yes, L&T has operating history of more than 100 years. It is a very well-regarded company that hhas a majority share in the Government's capital spending. Does the company have high repeat customer usage? Yes, one of L&T’s biggest customers is the Government of India whichfrequently awards L&T new projects due to its cost competitiveness, execution and quality. Does the company have a credible moat? Yes, while entry and exit into the infrastructure business in India is unrestricted, L&T still remains the biggest EPC (Engineering, Procurement & Construction) company in India. It is multiple times bigger than its closest competitor. It is one of its kind in terms of its ability to ‘design to build to operate’ capability. Thus, size, execution history, technological leadership and Jong experience of operating in India prove to be important moats for the company. Is the company sufficiently robust to major regulatory or geopolitical risks? No, the company is highly exposed to government's regulation and policies both directly and indirectly. This is due to the nature of its business, Is the business of the company immune from easy replication by new players? ‘Yes, it is difficult and capital consuming to replicate L&T’s product/service offering. The sheer length and breath of services offered by L&T is overwhelming. In fact L&T provides services to many of its competitors too. Is the company's product able to withstand being easily substituted or outdated? ‘Yes, while the design and construction technology continues to change, there is no substitute for infrastructure as a product. Are the customers of the company devoid of significant bargaining power? hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 6187sprog Value Research Stock Advisor - Larsen & Toubro No, L&T’s customers are Governments and large companies which have bargaining power due to the presence of large number of vendors and the tender system of awarding contracts. Are the suppliers of the company devoid of significant bargaining power? Yes, &T’s suppliers are much smaller in size and depend on L&T for majority of their business. Is the level of competition the company faces relatively low? No, the EPC industry is very competitive with global players fighting to win contracts which are awarded by a tendering system. Management Do any of the founders of the company still hold at least a 5 per cent stake in the company? Or do promoters totally hold more than a 25 per cent stake in the company? No, there is no promoter holding in L&T as it is completely professionally managed. However, large financial institutions like LIC and Asset Management Companies hold a major share, as do L&T employees. Do the top three managers have more than 15 years of combined leadership at the company? Yes, the company has a long list of capable business managers in all its segments. Its Chairman, ‘AM Naik, who is actively involved in key decision making has been working at L&T for nearly 50 years. He is set to retire and replace by Mr. S.N. Subrahmanyan, who has also worked with L&T for more than 30 years. Is the management trustworthy? Is it transparent in disclosures which are consistent with Sebi guidelines? Yes, the management have fair number of truly independent directors. They have not committed any significant violations of SEBI guidelines. Is the company free of litigation in court or with the regulator that casts doubts on the intention of the management? Yes, there is no meaningful contingent amount and litigation. Is the company’s accounting policy stable? Yes, the company has not made any major changes in accounting policies in the recent past. Is the company free of promoter pledging of its shares? Yes, the company is free from promoter pledging. Financial Did the company generate current and five-year average return on equity of more than 15 per cent and return on capital of more than 18 per cent? No, on standalone numbers, L&T reported FY2017 ROE and ROCE at 12.4% and 14.7% respectively. Five year average ROE and ROCE is 15.1% and 17.8% respectively. ‘Was the company’s operating cash flow-positive during the previous year and at least four out of the last five years? Yes, the company has had positive operating cash flows in all preceding five financial years. hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 187sprog Value Research Stock Advisor - Larsen & Toubro Did the company increase its revenue by 10 per cent CAGR in the last five years? No, standalone revenues have grown by SGR in the past five years. Is the company's debt-to-equity ratio less than 1 or is its interest coverage ratio more than 22 Yes, company’s FY2017 standalone debt to equity ratio was only 0.23 and interest coverage ratio is 54x. Is the company free from reliance on huge working capital for day to day affairs? Yes, company's standalone cash conversion cycle for FY2017 was negative 31 days. The company has continuously reduced its working capital over the last five years. Can the company run its business without relying on external funding in the next three years? Yes, as on FY2017 end (standalone), the company has healthy cash and current investments of Rs 10,784 crore which is enough to take care of its capital expenditure and debt. Have the company’s short term borrowings remained stable or declined (not increased by greater than 15%)? Yes, standalone short term debt has decreased from Rs 4,176 crore in FY2016 to Rs 2,335 crore in FY2017. Valuation Does the stock offer operating earning yield of more than 8 per cent on its enterprise value? No, the earning yield is slightly lower at 6.8% [As on October 24, 2017] Is the stock’s price to earnings less than its five year median level? Yes, current price to earnings is 25.1 which is slightly lower than its five year median level of 25.5. Is the stock’s price to book value less than its five or ten year average level? Yes, current price to book is 3.1 which is slightly lower than its five year median level of 3.2. To sum up Is it a solid business with an able management and a great balance sheet? ‘Yes, L&T has a promising business, that of building and constructing important infrastructure and engineering goods. Its management team has good credentials and has been working with L&T for a long time. Does the company believe in taking care the interests of all stakeholders — customers, employees, shareholders? ‘Yes, the company has been known to retain some of the best talent in the industry and from B- schools. L&T has created a long lasting relationship with its suppliers and customers. With regard to shareholders, the company has not taken any deletrious decision which could hamper minority shareholders. The company is professionally run and part owned by the employees themselves. Do you want to know more about this company? Are you willing to spend more time digging out information about it? hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 8187sprog Value Research Stock Advisor - Larsen & Toubro Yes, L&T’s strategy to diversify across various sectors and offer ‘design to deliver’ services is also its best attribute. The impressive size of company’s operations is a result of a strategic vision set out by the management team to be a ‘one stop shop’ for all kind of technology, engineering, construction, manufacturing and financial services which makes L&T a promising player to watch out for. Disclosure: Mohit Khanna did not own shares in L&T as on the date of publication of this report. Independent Advisors LLP and its associates did not own shares in L&T as on the date of publication of this report. ‘To view the latest stock holdings of the current Value Research Stock Advisor team, click here, hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 9187sprog Value Research Stock Advisor - Larsen & Toubro L&T: Headwinds and Tailwinds Factors that will call for buying the stock and for selling it MOHIT KHANNA + 27 October 2017 Tailwinds (When you should stay invested or increase exposure) + Increased government investment in power plants, roads, ports, airports, etc. Headwinds (When you should consider selling or cutting exposure) + Order inflow dries up and future visibility of capital investment weakens. Disclosure: Mohit Khanna did not own shares in L&T as on the date of publication of this report. Independent Advisors LLP and its associates did not own shares in L&T as on the date of publication of this report. To view the latest stock holdings of the current Value Research Stock Advisor team, click here, hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 10187sprog Value Research Stock Advisor - Larsen & Toubro L&T in a hostile takeover bid for Mindtree Resistance from Mindtree founders could see more twists and turns before L&T takes over SACHIN KUMAR + 19% March 2019 Lae & Toubro (L&T) has announced its plan to acquire a 66.3 per cent stake in the mid-sized information technology services company, Mindtree Limited (market capitalisation of Rs. 15,665 crore) for an estimated all-cash consideration of Rs. 10,733 crore. The offer values Mindtree at a trailing twelve months price to earnings (ITM PE) of 21.8 times, which is close to its five-year median PE of 20.4 times. Mindtree would remain an independent listed entity post- acquisition. Here are the details of the proposed transaction: The company has entered into a share purchase agreement with the leading shareholder of Mindtree, Mr. V.G. Siddhartha and his group entities for acquiring their 20.32 per cent stake in the company at a price of Rs. 980 per share. This would be supplemented by an open market purchase of 15.1 per cent stake at a maximum price of Rs. 980 per share. L&T would also be making an open offer to shareholders holding 31 per cent stake at Rs. 980 per share which would take its total stake to 66.3 per cent in Mindtree. The transaction, subject to regulatory hurdles, is estimated to be completed by the first quarter of FY2020. Transaction branded as hostile by the Mindtree's promoters Mindtree’s promoters who hold a 13.3 per cent stake in the company, are strongly opposed to the deal. To block L&T’s offer, the company’s board is meeting tomorrow, on the 20% March 2019, wherein a share buyback proposal would be considered, What prompted L&T to go for the acquisition L&T already has a meaningful presence in the information technology space. Its two listed information technology subsidiaries, L&T Infotech, and L&T Technology Services, contributed 22.4 per cent of the consolidated group profit for FY2018. As per L&T’s management, Mindtree ‘would be a good complementary fit for the group. It is expected to add significant scale to the group's hi-tech, consumer goods and retail, and travel verticals, where the group's presence is less at the moment. The acquisition would enhance the group's digital capabilities and augment presence in information management system (IMS) and cloud. As per the management, the acquisition would be neutral in the short-term for return on equity (ROE) and accretive over the medium to long-term. History and brief details of Mindtree hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 187sprog Value Research Stock Advisor - Larsen & Toubro Mindtree's origins date back to August 1999, when 10 professionals pooled-in their resources and floated the venture. The company’s IPO came in 2007. Reputed for high standards of corporate governance, it is the seventh largest IT company in India, with more than 18,000 employees spread across 45 offices in 18 countries globally. The company is known for its deep domain. expertise, long-lasting customer engagements with a key industry focus and had 338 active clients as at FY2018. In the past five years, the company has grown its revenue and adjusted earnings per share at a CAGR of 18.3 per cent and 11.2 per cent respectively. During this period, the return on capital employed and return on equity have averaged 31.7 per cent and 24.7 per cent respectively. How does the acquisition route look ahead? ‘The promoters hold only 13.33 per cent stake in Mindtree, which diminishes their ammunition to fend off the takeover offer alone by themselves. Mutual funds and institutions collectively hold 50.91 per cent stake, out of which 10.6 per cent stake is held by Nalanda Equity Fund. L&T has already signed a share purchase agreement with the leading shareholder V.G. Siddhartha (20.3 per cent shareholding). If any or some of the major institutional shareholders like Nalanda Equity Fund come on board, it could pave the way for acquisition. Source of funding L&T needs Rs. 10,773 crore for the acquisition. As per the standalone balance sheet for September 30, 2018, the cash and bank balances stood at Rs. 3,635 crore. In addition, current investments (bonds, mutual funds etc.) stood at Rs. 9,094 crore. The debt to equity ratio stood at a comfortable 0.40 times. The balance sheet, therefore, allows L&T the capacity to fund the acquisition without taking on the undue financial burden. Our Take If the acquisition of Mindtree were to see the light of the day, it would add about 5 per cent to the consolidated group revenue (on FY2018 base) and therefore is not material at an overall level. However, it would add meaningfully to the size of the information technology services business (an increase of 49 per cent to revenue of IT vertical on FY2018 base). On the funding side, comfort is also derived from Rs. 11,200 (net of tax) proceeds to be received from the ongoing divestment of the electrical and automation segment, likely within FY2020. On the qualitative side, integrating the culture of a people and client-centric business such as information technology services company is always a challenge. It would be also interesting to observe how L&T’s vision for the larger information technology universe unfolds, as it already has a 74.8 per cent leading IT subsidiary, L&T Infotech Limited. We have no change in the recommendation on the company, and it continues to be a buy at the current level. (This article is linked to our coverage of Larsen & Toubro) Disclosure Sachin Kumar did not own shares in Larsen & Toubro as on the date of publication of this report. Independent Advisors LLP and its associates did not own shares in Larsen & Toubro as on the date of publication of this report. ‘To view the latest stock holdings of the current Value Research Stock Advisor team, click here, hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 12187sprog Value Research Stock Advisor - Larsen & Toubro L&T net profit up 37% on services & infra push Order inflows declined by 12 per cent Y-0-Y to Rs. 42,233 crore. Strong execution drove revenue growth, which rose 24.2% during the quarter to Rs 35,709 crore SACHIN KUMAR = 26" January 2019 arsen & Toubro announced a good set of numbers for the third quarter ended 31 December 12018. Consolidated revenues increased 24.2 per cent year-on-year (Y-0-Y) to Rs. 35,709 crore, driven by healthy performance of infrastructure, hydrocarbon, heavy engineering and services businesses. Lower employee expenses and savings in selling, general and administrative (SG&A) pushed the operating profit (EBITDA) up by 27.2 per cent Y-0-Y to Rs. 3,996 crore. Operating margin improved by 0.3 percentage points to 11.2 per cent. Higher other income aided net income, which registered an increase of 37 per cent Y-0-Y to Rs. 2,042 crore. What was disappointing during the quarter was a decline in order inflows by 12 per cent Y-0-Y to Rs, 42,233 crore. This was due to the delays in order awards in the transportation, infrastructure, heavy civil infrastructure and power businesses. International orders constituted 27 per cent of the total order inflow. The consolidated order book stood at Rs. 284,049 crore, which improved on sequential basis by 1 per cent. Here is the segment wise performance Infrastructure (constituted 51 per cent of group revenue and 21 per cent of segment profit) Revenues from the segment improved 24 per cent Y-0-¥ to Rs. 18,206 crore, driven by good execution across business verticals. Segment operating margin though registered a decline of 2.5 percentage points Y-0-Y to 5.4 per cent due to stage of job mix and cost provisions arising from execution headwinds in some transportation infra projects. Power (constituted 2.5 per cent of group revenue and 0.4 per cent of segment profit) Revenues from the power segment declined 29 per cent Y-0-Y to Rs. 905 crore, reflecting depleting order book. Segment operating margin though improved 0.5 percentage points Y-0-Y to 2.9 per cent owing to higher contribution by international jobs. Defence engineering (constituted 2.9 per cent of group revenue and 1.5 per cent of segment profit) Revenues from the segment increased 36 per cent Y-0-Y to Rs. 1,005 crore, led by execution of tracked artillery gun powder order. Operating margin improved 1.6 percentage points to 9 per cent due to stage of execution and job mix. Hydrocarbon segment (constituted 10.6 per cent of the group revenue and 7.5 per cent of segment profit) Revenues increased 22 per cent Y-0-¥ to Rs. 3,761 crore, led by accelerated execution in key projects in its portfolio. Operating margin improved 0.2 percentage points Y-0-Y to 8.2 per cent owing to execution efficiency. Information technology services (constituted 10.5 per cent of group revenue and 21 per cent of segment profit) hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 1387sprog Value Research Stock Advisor - Larsen & Toubro Revenues increased 29 per cent Y-0-Y to Rs. 3,701 crore, driven by focus on digital technologies and strong performance by an array of business verticals (banking & financial services, retail & pharma, media & entertainment etc.). Operating margin improved 0.9 percentage points Y-0-¥ to 22.2 per cent led by operational efficiencies. Financial services (constituted 9.1 per cent of group revenue and 21.4 per cent of operating profit) Income from operations improved 24 per cent Y-0-Y to Rs. 3,259 crore driven by healthy growth in the loan book of rural and housing finance segments. Operating margin increased 14.6 per cent Y- o-¥ on account of higher net interest margin, growth in fee and other income and lower credit costs on account of emphasis on improved asset quality. Key takeaways from the conference call Private sector capex continues to be muted and orders are primarily coming from the government sector. On revenue guidance, sales are estimated to at the higher end of the earlier guided range of 12-15 per cent Y-0-¥ increase. Order inflows are projected to grow at between 10-12 per cent Y-0- ¥. On share buyback ‘There are several options still on the table, one of which is to approach the Securities & Appellate ‘Tribunal (SAT) to appeal against the SEBI decision. The buyback chapter is, therefore, not closed. Ultimate aim is to return cash to the shareholders. Our Take ‘While the results were good, the slowdown in order inflows is a negative. With the impending general elections, order pipeline from government end is likely to be tepid at least in the coming quarter or two. In the wake of oil price correction, new order inflows in the hydrocarbon segment, especially from the mid-east region would be a key monitorable. In addition, with concerns being raised on global economic slowdown in the offing, it would be interesting to see how the IT&ES business, which has so far been contributing nicely to the overall performance performs. Over the longer term L&T is well positioned to take advantage of the government's push on infrastructure creation, further supported by structural reforms underway in India led by IBC, GST, RERA and other reforms. This could be further aided by a pick-up in private sector capex, which is muted at the moment. The headwinds around buyback related development would likely subside going ahead, as the management seems steadfast to return cash to shareholders through some means. A liberal dividend could be contemplated, if the buyback route is not possible under the regulatory regime. We have no change in our stance on the company and it remains a ‘buy’ at the current levels. Here is a snapshot of the latest quarterly results hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 14187sprog Value Research Stock Advisor - Larsen & Toubro + Revenues increased 24.2 per cent Y-0-Y to Rs. 35,709 crore + Operating profit (EBITDA) improved 27.2 per cent Y-0-Y to Rs. 3,996 crore + Operating profit margin improved 0.3 percentage point Y-0-Y to 11.2 per cent + Net profit increased 37 per cent Y-0-¥ to Rs. 2,042 crore + Diluted earnings per share increased 37.6 per cent to Rs. 14.54 per share + Order inflows decreased 12 per cent Y-0-Y to Rs. 42,233 crore All growth percentages are compared to the same quarter of the previous year, unless otherwise stated. (This article is linked to our coverage of Larsen & Toubro Disclosure: Sachin Kumar did not awn shares in Larsen & Toubro as on the date of publication af this report. Independent Advisors LLP and its associates did not own shares in Larsen & Toubro as on the date of publication of this report. ‘To view the latest stock holdings of the current Value Research Stack Advisor team, click here, hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 15187sprog Value Research Stock Advisor - Larsen & Toubro L&T’s buyback is off the table Sebi nudges company not to go ahead with the buyback offer as the offer would increase its, debt/equity ratio SACHIN KUMAR » 21°‘January 2019 Ihe share buyback plan announced by L&T in August 2018 will not materialise as the market regulator SEBI (Securities and Exchange Board of India) has advised the company not to proceed with it on grounds of regulatory non-compliance. Regulatory requirements and where L&T erred Under the SEBI buyback regulations (read with Companies Act 2013 provisions), the aggregate of the borrowings after the buyback should not be more than twice the paid-up capital and free reserves based on financial statements of the company. The company may have applied for buyback basing their calculations on standalone financial statement. At the standalone level, the company was well within the regulatory ambit to execute the buyback. L&T has a finance subsidiary -- L&T Finance Holdings Limited -- which tends to expand the borrowings at the consolidated level. Impact ‘We had recommended subscribers to avoid the buyback (please refer to our note dated 9" October, 2018). But from short-term perspective, the development is a negative as it raises questions on L&T’s lack of proper groundwork before announcing such a big decision. Further the decision not to proceed with the buyback also provides a roadblock in the path of the management to spruce up the return on equity to 18 per cent by FY2021 under its ‘Project Lakshya.’ The company is slated to announce its results on 25 January 2019, post which it would be holding the analyst call in which the buyback issue and latest financials would be discussed. We would be keeping our subscribers posted with all the developments and assessing our investment stance on the company. (This article is linked to our coverage of Larsen & Toubro Disclosure: Sachin Kumar did not own shares in Larsen & Toubro as on the date of publication of this report. Independent Advisors LLP and its associates did not own shares in Larsen & Toubro as on the date of publication of this report To view the latest stock holdings of the current Value Research Stock Advisor team, click here, hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 18187sprog Value Research Stock Advisor - Larsen & Toubro Healthy government ordering drives L&T’s Q2 show Company's revenues up 21.3%, while net profit increased 22.6%, concerns over private sector capex remain VIKAS VARDHAN + 015% November 2018 arsen & Toubro announced good set of numbers for the second quarter ended 30 September 2018. What really stood out was a strong 46 per cent year-on-year (y-0-y) growth in order inflows during the quarter, driven by rise in domestic public sector tendering activity. This is a further improvement from 37 per cent y-0-y increase in order inflows recorded in the immediately preceding quarter. Overall, the consolidated order book improved to Rs. 281,166 crore (up from Rs. 271,732 crore in the first quarter of FY2019), which is about 2.3 times March 2018 group revenue and provides the much needed visibility, into the foreseeable future. International orders constituted 22 per cent of total order book. Operational results For the second quarter of FY2019, revenue improved 21 per cent year-on-year to Rs. 32,081 crore. ‘This was driven by improved execution in infrastructure segment aided by healthy growth in services business (IT&ES), realty and hydrocarbon segments. Lower operating and finance costs came to the aid of operating profit (EBIT), which recorded an even higher 29 per cent y-0-y increase, coupled with a 0.6 percentage point improvement in margin at 10.1 per cent. Higher tax expense and profit attributable to minority shareholders led to a lower increase in net income, which increased 23 per cent y-o-y to Rs. 2,230 crore. There was an exceptional item of Rs. 295 crore on account of recovery of dues written-off earlier, favorably settled by NCLT. Adjusted for the one-off net profit improved 21 per cent y-o-y to Rs. 2,009 crore. Segment-wise performance Infrastructure: This segment accounts for 48 per cent of group revenue and 24 per cent of profit before tax. The segment recorded a 22 per cent y-o-y improvement in revenue to Rs. 15,223 crore, driven by good execution progress in all the businesses. Segment operating income (EBITDA) ‘though dipped 0.6 percentage point y-o-y, reflecting the phase and job-mix of contracts under execution. Hydrocarbon: This segment accounts for 11 per cent of revenue and 9 per cent of profit before tax. Revenue from this segment recorded a significant 34 per cent y-o-y increase to Rs. 3,544 crore on project execution. Segment margin though declined by 0.8 percentage point owing to expected credit loss provisions. IT & Technology services: This segment accounts for 11 per cent of revenue and 22 per cent of profit before tax. Revenue increased 32 per cent y-0-y to Rs. 3,573 crore bolstered by excellent results posted by L&T Infotech (banking & financial, retail & pharma, high-tech media & entertainment verticals) and L&T Technology services (telecom & high-tech, transportation and process engineering verticals). Operating margin too witnessed a 2.4 percentage points improvement y-0-y to 24.1 per cent aided by currency and operational efficiencies. hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 17187sprog Value Research Stock Advisor - Larsen & Toubro Financial services: This segment accounts for 10 per cent of revenue and 22 per cent of profit before tax. The segment reported a 30 per cent y-o-y improvement in revenue to Rs. 3,139 crore, driven by growth in loan assets and disbursements in rural finance. Assets managed by wealth management business registered a sharp rise on healthy inflows. Segment operating margin too improved by a hefty 12.8 percentage points, on the back of higher fee income. Power: This segment accounts for 3.3 per cent of group revenue and 2 per cent of profit before tax. Revenue in this segment declined by 36 per cent y-o-y to Rs. 1,059 crore, reflecting a depleting order book. Segment EBITDA was higher though by 0.6 percentage point y~ reversal of expected credit loss provisions on receipt of customer collections. owing to Heavy engineering: This segment accounts for 2 per cent of group revenue and 3 per cent of profit before tax. Revenue improved 53 per cent y-0-y to Rs. 465 crore, driven by execution, momentum in oil & gas and nuclear projects. Segment margins improved 2 percentage points to 24.2 per cent driven by cost savings and efficient execution. Defence engineering: This segment accounts for 3 per cent of group revenue and 6 per cent of profit before tax. Revenue was lower by 6 per cent y-o-y at Rs. 930 crore owing to lower pace of procurement by the government. Segment operating margin improved to 25 per cent (compared to 10.6 per cent a year ago) led by progress in a key jobs, which crossed margin recognition threshold. Others segments: This segment accounts for 5 per cent of revenue and 9 per cent of profit before tax. The segment reported a 67 per cent y-o-y improvement in revenue to Rs. 1,448 crore. This was mainly on account of adoption of an accounting standard for realty business, under which revenue is being recognised now on completed contract basis. Management outlook and guidance Government's thrust on infrastructure development, rural electrification, water supply and irrigation has provided investment momentum to the domestic market over the past several quarters. This is being supported by faster clearances of projects by the government to ensure their speedy, timely execution. Weak spot continues to be tepid private sector investment. Further fiscal pressures and increased current account deficit are adding to uncertainty in economic environment On international front increasing trade barriers, activation of sanctions and increasing geo- political tensions in the Middle East are seen to be impacting free trade. Surge in oil prices are, however, leading to revival of investment momentum in the Middle East regions, which augurs well for the infrastructure and hydrocarbon segments. Management has maintained its outlook of a 12-15 per cent increase in revenue and 10-12 per cent increase in order inflows for the FY2019, as it believes that most of the large orders were placed in the first half of this year itself (being an election year). Our take hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 18187sprog Value Research Stock Advisor - Larsen & Toubro L&T results should not be looked at in isolation. It’s a referendum on overall macroeconomic environment prevailing in both domestic as well as international markets. So far the company seems to be benefitting from at least one of the engines of the domestic economy firing well, which are public sector investments driven by government's infrastructure push. On the services side of the business, IT&ES is also doing well strengthened by favourable developments in western nations. But these things can change fast in a dynamic world and when they do change capital expenditure are the first to be curtailed. To begin with what could possibly go wrong is the government fiscal situation. India’s heavy dependence on oil makes the government finances vulnerable to oil shocks and limits government’s ability to announce and fund major projects. There also remains the likelihood of a full-blown out banking sector rout engulfing the economy, if not contained in the backyard. In addition, technology services is also prone to disruption in the most critical US markets, with talks around H1B Visa etc raising its ugly head time and again. At a company-specific level though, we continue to be impressed with the management and their ‘Lakshya’ vision which attempts to increase return on equity to 18 per cent by FY2021, is steadfastly getting rid of non-core assets, returning cash to shareholders by buyback (already underway). It is the best possible proxy to play revival in private sector investment, as and when it happens. We hope and believe that all the macroeconomic risks would be contained within a limited sphere. The company has crossed many such barriers in the past and is ever so strongly positioned with a robust balance sheet to navigate more such disturbances as and when they erupt. We have no change in the recommendation and we continue to maintain a ‘buy’ on the stock at the current levels. Here is a snapshot of latest quarterly results + Revenue improved 21.3 per cent y-o-y to Rs. 32,081 crore + Operating profit (EBIT) increased 28.6 per cent y-o-y to RS. 3,255 crore + Net profit increased 22.6 per cent y-o-y to Rs. 2,230 crore + Adjusted net profit increased 21.4 per cent y-o-y to Rs. 2,009 crore + Diluted earnings per share increased 22.5 per cent to Rs. 15.88 per share. All growth percentages are compared to the same quarter of the previous year, unless otherwise stated. (This article is linked to our coverage of Larsen & Toubro) Disclosure: Vikas Vardhan did not own shares in Larsen & Toubro as on the date of publication of this report. Independent Advisors LLP and its associates did not own shares in Larsen & Toubro as on the date of publication of this report. ‘To view the latest stock holdings of the current Value Research Stock Advisor team, click here, hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 19187sprog Value Research Stock Advisor - Larsen & Toubro Investors should skip L&T buyback Stock continues to be a ‘buy’ as fundamentals remain strong. If investors like this one-off opportunity and paying taxes and buying it back, then they can participate in the buyback offer but it is complicated SACHIN KUMAR + 09" October 2018 1n pursuance of the buyback offer announced by Larsen & Toubro in August 2018, the company fhas put up a maximum of 6.1 crore shares (4.4 per cent of its total paid-up equity) for buyback ata price of Rs. 1,475 per share. Companies use buybacks to distribute surplus cash on their books. Any investor holding shares of the company on or before October 12, 2018 is eligible for this buyback. Once the company buys the shares, it would extinguish them, thus, reducing the total outstanding shares. The future earnings are distributed among lower number of shares. All remaining shareholders get a bigger share of the company’s profits. Further, since the company’s net worth reduces, its return on equity goes up. Recommended course of action for the shareholders Our recommendation on L&T remains intact and we continue to have a ‘buy’ on the stock at the current market price. The stock, in fact, presents an attractive opportunity to take advantage of the recent market correction. We, therefore, advise investors not to participate in the buyback. On the face of it, the offer price of Rs.1,475 per share is at a premium of 17 per cent compared to the current market price of Rs. 1,230 per share (very close to our recommended price of Rs. 1,223 per share). So, investors may be tempted to tender their shares in the buyback, make a pre-tax gain of 17 per cent and hoping that the price stays at the same level, may repurchase shares back. But it’s much more complicated than it seems. This is because not all shares tendered by investors would be honoured. Here the acceptance ratio comes in the picture, which is the ratio of shares, accepted in the buyback offer. Also, what is relevant is the price at which the stock is bought back by him again. For illustration purposes, assuming that the stock stays close to the prevailing market price of Rs. 1,230 per share and that the acceptance ratio is 10 per cent, then the investor would be able to lower his cost by about 2 per cent (pre-tax) by booking gains and re-entering. An acceptance ratio of 20 per cent lowers cost by 4 per cent (pre-tax) and at 50 per cent, the saving is 10 per cent (pre- tax). Hence, if investors like this one-off opportunity of tendering shares for the buyback, paying taxes and buying it back, then they can participate in the buyback offer (hoping that the stock price remains at around current levels or falls further) and repurchase more shares with the proceeds to bring down the average cost of acquisition. Else the offer can be avoided. What prompted L&T to go for the buyback route? hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 20187sprog Value Research Stock Advisor - Larsen & Toubro ‘The company’s balance sheet is flush with cash and equivalents, which stood at Rs. 16,200 crore as. of June, 2018, Furthermore, it is expected to receive an additional Rs. 11,200 crore (net of tax) from its recent divestment of non-core assets during the next year and a half. This is going to be further augmented by free cash flows from regular business operations every year. Out of this Rs 9,000 crore is intended to be used for the buyback. Lowering cash on the balance sheet is a route that’s used to improve return on equity (ROE) as idle cash sitting on the books is otherwise invested in the low-yielding liquid mutual funds/Bank FD and this drags ROE lower. The management of L&T is working towards improving its ROE to 18 per cent (from FY 2016 ROE of 16 per cent) by FY 2021 under ‘Project Lakshya’. The company is also past its capital expenditure cycle and does not need cash in the near future, Hence, the company deemed it prudent to deploy cash for the buyback. What is a buyback offer? Companies use buybacks to distribute surplus cash on their books. Shareholders that want a higher exit price for their shares are, thus, offered an opportunity to do so. The offer price is usually higher than the prevailing market price to provide an incentive for investors who want to exit. As per SEBI guidelines, 15 per cent quota for any buyback offer is reserved for small shareholders, who hold shares of the value of up to Rs. 2,00,000 (at the current market price of this translates into 165 shares). (This article is linked to our coverage of Larsen & Toubro Disclosure: Sachin Kumar did not awn shares in Larsen & Toubro as on the date of publication of this report. Independent Advisors LLP and its associates did not own shares in Larsen & Toubro as on the date of publication of this report. ‘To view the latest stock holdings of the current Value Research Stack Advisor team, click here, hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 21187sprog Value Research Stock Advisor - Larsen & Toubro L&T shares jump 6.7% on buyback news Company to decide on buyback at its board meeting to be held on 23 August SACHIN KUMAR + 20 August 2018 Lae & Toubro’s shares ended the day at Rs. 1,323.7, up 6.7 per cent from its previous closing price, following the announcement made by the company last week that it was considering to buy back shares from the market. The board of L&T is meeting on Thursday (23 August 2018) to decide on the buyback. If approved, this would be the first-ever buyback by L&T. The company has sufficient liquid assets to fund the buyback with cash and equivalents standing at Rs. 16,200 crore as of June 30, 2018. In addition, the recent divestment of its electrical and automation business is likely to fetch an additional Rs. 11,200 crore (post-tax) in the next year and a half. L&T is committed to enhancing its return on equity to 18 per cent (FY 2018: 16 per cent) by FY21, which is a part of its strategic plan titled ‘Lakhsya.’ The proposed buyback is a step in that direction. Post the announcement of the buyback, we would come out with a note on its size, implications on the balance sheet and recommended action for the investors. (This article is linked to our coverage of Larsen & Toubro Disclosure: Sachin Kumar did not awn shares in Larsen & Toubro as on the date of publication of this report. Independent Advisors LLP and its associates did not own shares in Larsen & Toubro as on the date of publication of this report. To view the latest stock holdings of the current Value Research Stock Advisor team, click here, hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 22187sprog Value Research Stock Advisor - Larsen & Toubro Bellwether L&T performance in Q1 healthy Company on track to improve earnings quality as domestic order inflow sustains momentum. SACHIN KUMAR + 26¢ July 2018 arsen & Toubro (L&T) reported a 36.1 per cent increase in net profit at Rs. 1,215 crore for the first quarter ending June 2018. Revenue for the quarter was up 17.9 per cent (year-on-year) at Rs, 28,283 crore. Operating income (EBITDA) for the first quarter increased 40.4 per cent (y-0-y) to Rs, 2,913 crore with a 1.6 percentage point improvement in margin. During the first quarter, new orders worth Rs. 36,142 crore were won by the company, registering an improvement of 37 per cent (y-0-y) led by pick-up in domestic ordering. Consolidated order book as at June 30, 2018 stood at Rs. 271,732 crore, an increase of 3.7 per cent compared to FY18 end. Quarterly segment performance: Infrastructure: The segment constituted 44 per cent of total revenue in the first quarter. A pickup in heavy civil, water and transportation infrastructure, drove revenue up 9 per cent (y-0-y) at Rs. 12,135 crore. Operating profit improved 8 per cent to Rs. 665 crore. Order inflow registered an. increase of 16 per cent (y-0-y) at Rs. 19,395 crore, driven by turnkey projects awarded in water & effluent treatment business. Power: The segment constituted 4 per cent of total revenue in the first quarter. Subdued ordering activity amid intense competition knocked-off 39 per cent from revenue (y-0-y) at RS. 1,081 crore. Operating profit improved to Rs. 33 crore (compared to Rs. 13 crore y-o-y) owing to reversal of expected credit losses, led by improved collection of receivables. Heavy engineering: The segment comprised one per cent of total revenue. Improved demand from oil & gas and nuclear power equipment drove up revenue 2 per cent (y-0-y) to Rs. 334 crore Operating profit improved to Rs. 110 crore (compared to Rs. 19 crore y-o-y) on the back of efficient execution of orders and reversal of expected credit losses. Defence engineering: The segment constituted three per cent of total revenue. Progress on project execution led to revenue improving 34 per cent (y-0-y) at Rs. 727 crore. Operating profit increased to Rs. 48 crore (compared to loss of Rs. 59 crore y-o-y which was impacted by inventory write down). Hydrocarbon: The segment constituted 12 per cent of total revenue. Robust order book and efficient execution led to revenue improving 38 per cent (y-0-y) to Rs. 3,511 crore. The operating profit too increased by 48 per cent (y-0-y) to Rs. 209 crore, with a 0.2 percentage point rise in operating margin. Order inflow increased by 23 per cent (y-0-y) owing to pick up in tendering activity in both domestic and international markets hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 23187sprog Value Research Stock Advisor - Larsen & Toubro IT & technology services: The segment constituted 12 per cent of total revenue. The revenue increased 31 per cent (y-0-y) to Rs. 3,324 crore led by telecom & hi-tech and transportation. verticals. The operating profit too witnessed a 55 per cent (y-0-y) improvement to Rs. 761 crore with a 3.3 percentage point margin expansion. Development projects: The segment comprised five per cent of total revenue. Revenue increased 81 per cent (y-0-y) to Rs. 1,494 crore driven by divestment proceeds of Kattupalli port during the quarter. Others: The segment constituted five per cent of total revenue. Revenue increased 46 per cent (y- 0-y) to Rs. 1,341 crore driven by adoption of new accounting standards provisions applicable for realty business whereby revenue is being recognised now on completed contract method. The segment recorded an operating loss at Rs. 417 crore (compared to gain of 139 crore y-o-y) dragged down by provisioning for a disputed project in realty business. Here's a snapshot of the latest quarterly results: + Revenue stood at Rs. 28,283 crore. + Net profit up 36.1 per cent to Rs. 1,215 crore. + Diluted earnings per share stood at Rs. 8.65 per share vs. Rs. 6.36 last year. Our Take: First quarter results of Larsen & Toubro were satisfactory. The company continued on its path of growth momentum registering positive revenue growth for 17 straight quarters. Expansion in operating margin is a stand out and reaffirms management commitment to improving earnings quality. ‘The tailwinds which are propelling revenue growth remain intact with higher government spending on infrastructure, energy and rural sector coupled with tax and banking reforms. Firm oil prices are likely to continue incentivise infrastructure and hydrocarbon capex in the middle east region. On the flip side though volatile oil prices (which could dent government's ability to spend), potential global tariff barrier issues and currency volatility are the main concerns. Our fundamental thesis on the company remains intact and we continue to maintain a buy on the stock. All growth percentages are compared to the same quarter of the previous year, unless otherwise stated. (This article is linked to our coverage of Larsen & Toubro) Disclosure: Sachin Kumar did not own shares in Larsen & Toubro as on the date of publication of this report. Independent Advisors LLP and its associates did not own shares in Larsen & Toubro as on the date of publication of this report. hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 24187sprog Value Research Stock Advisor - Larsen & Toubro ‘To view the latest stock holdings of the current Value Research Stock Advisor team, click here, hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 28157sprog Value Research Stock Advisor - Larsen & Toubro L&T ends the year on a high Operating income gallops, with the highest ever order inflow in a quarter SACHIN KUMAR + 29% May 2018 arsen & Toubro (L&T) reported a 22 per cent jump in net profit at Rs. 7,370 crore for FY18. Revenue for the full year was up nine per cent (y-0-y) to Rs. 1,19,862 crore. Operating income (EBITDA) for the fourth quarter increased 23 per cent (y-0-y) to Rs. 5,390 crore with a 0.7 percentage point improvement in margin (excluding services). Margin improvement was driven by efficient project execution and tighter cost controls. Net profit for the fourth quarter improved five per cent (y-o-y) to Rs. 3,167 crore while revenue increased 10 per cent (y-0-y) to Rs. 40,678 crore. During the fourth quarter, the order book improved 5 per cent (y-0-y) to Rs. 49,557 crore. For FYI8, the total order book increased seven per cent (y-0-y) to Rs. 152,908 crore, driven by order wins in the infrastructure and hydrocarbon segments. Consolidated order book stood at Rs. 263,107 crore as at March 31, 2018. Post the completion of fourth quarter, on May 1, 2018 a definitive agreement was signed with Schneider Electric for strategic divestment of the electrical and automation (E&A) business, for an all cash consideration of Rs. 14,000 crore. For details, please refer to our note published on May 2, 2018. ‘The Board has recommended a final dividend of Rs. 16 per share. Quarterly Segment performance: Infrastructure: The segment constituted 57 per cent of total revenue in the fourth quarter. A pickup in civil and water businesses drove revenue up 15 per cent (y-0-y) at Rs. 22,946 crore. Operating profit improved 17 per cent to Rs. 2,945 crore with margin remaining unchanged at 13.5 per cent. Order inflow registered an increase of 27 per cent (y-o-y) at Rs. 33,455 crore, reflecting domestic investment momentum. Power: The segment constituted four per cent of total revenue in the fourth quarter. Subdued ordering activity and intense competition knocked-off 18 per cent from revenue (y-0-y) at Rs. 1,502 crore. Operating profit declined 12 per cent to Rs. 52 crore (y-0-y). Heavy engineering: The segment comprised three per cent of the total revenue. New defence orders drove revenue up 23 per cent (y-0-y) to Rs. 1,148 crore. However owing to variation on job execution stages, the operating profit dipped 23 per cent (y-0-y) to Rs. 174 crore with a 9.6 percentage point decline in margin. Hydrocarbon: The segment constituted nine per cent of total revenue. Efficient execution of international order book led to revenue improving 38 per cent (y-o-y) to Rs. 3,548 crore. The operating profit however declined 14 per cent (y-0-y) to Rs. 179 crore, due to job stage mix (variability in profitability due to the project execution stage), with a 3.7 percentage point fall in operating margin. Order inflow declined by 59 per cent (y-0-y) owing to slowdown in international orders. hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 28157sprog Value Research Stock Advisor - Larsen & Toubro IT & technology services: The segment constituted eight per cent of total revenue. The revenue increased 24 per cent (y-0-y) to Rs. 3,075 crore led by telecom & hi-tech and transportation, verticals. The operating profit too witnessed a 24 per cent (y-0-y) improvement to Rs. 566 crore with a 0.6 percentage point margin expansion. Others: The segment comprised eight per cent of total revenue. Revenue decreased 29 per cent (y- 0-y) to Rs. 3,152 crore. Lower offtake in valves business, slowdown in realty sector and slower order book caused the underperformance. Operating profit though more than doubled to Rs. 814 crore owing to asset monetisation in the realty business. Here's a snapshot of the latest quarterly and full year results: Quarterly results: + Revenue stood at Rs. 40,678 crore. + Net profit up 4.7 per cent to Rs. 3,167 crore. + Diluted earnings per share stood at Rs. 22.55 per share vs. Rs. 21.39 last year. Full year results: + Revenue stood at Rs. 119,682 crore. + Net profit up 22 per cent to Rs. 7,370 crore + Diluted earnings per share up 22 per cent to Rs. 52.49 per share, Order write-offs: ‘The company undertook its largest ever write-off of Rs. 16,000 crore from its order book, constituting six per cent of its order book as at the end of March, 2018, owing to concerns over execution and payments. These projects are mostly from infrastructure and realty space, reflecting severe fund crunch being faced by the two sectors. What the management said “We are caught at crossroads of headwinds and tailwinds. Macro factors are not looking encouraging but there is tailwind coming from some of the policies implemented by the government. Private capex is still muted and we do not expect it to return in the next two years. The company is becoming more dependent on government and public sector for orders.” Guidance for FY19 Order inflow to increase 10-12 per cent; revenue can go up 12-15 per cent and margins are expected to be stable with an upward bias of 0.25 percentage point. Our Take: Larsen & Toubro’s growth momentum continued as the company posted positive revenue growth for 16 straight quarters. The improvement in operating margin is a positive and espouses confidence in the quality of earnings. The company is on course to achieve its objective of enhancing its return on equity, focus on core areas by divesting its non-core businesses, rationalizing staff and an overall tighter control over costs. hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 27187sprog Value Research Stock Advisor - Larsen & Toubro A number of reforms undertaken by the government such as GST (indirect tax), RERA (real estate),insolvency and bankruptcy proceedings (banking), even though disruptive in short-term, augur well for L&T’s prospects over the longer term. In the near term, it is largely dependent on government contracts for its growth in the wake of a benign private sector capex environment. Being an election year, the government may prioritize infrastructure development that would augur well for its order book. However, this is to be seen in the backdrop of elevated oil prices, which may widen government deficit, increase interest rates and thereby constrain government's capex program. Rising oil prices have one positive though as it would prop up its order book from Middle East. The management has given a realistic guidance in our view keeping all these concerns in its perspective. ‘The fundamentals of our investment thesis remain intact and we continue to maintain a buy on the stock. All growth percentages are compared to the same quarter of the previous year, unless otherwise stated. (This article is linked to our coverage of Larsen & Toubro) Disclosure: Sachin Kumar did not own shares in Larsen & Toubro as on the date of publication of this report. Independent Advisors LLP and its associates did not own shares in Larsen & Toubro as on the date of publication of this report. ‘To view the latest stock holdings of the current Value Research Stock Advisor team, click here, hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 28157sprog Value Research Stock Advisor - Larsen & Toubro L&T inks Rs 14,000 cr E&A divestment deal with Schneider Electric The move is in line with the company’s ongoing strategic initiatives, where one of the cornerstones is. to divest non-core assets SACHIN KUMAR + 02" May 2018 Larsen & Toubro (L&T) has entered into a definitive agreement with Schneider Electric for divesting the company’s electrical and automation (E8&A) business for an all-cash consideration of Rs 14,000 crore. This is in line with L&T’s ongoing strategic initiatives, where one of the cornerstones is to divest non-core assets. The deal is subject to regulatory approvals and is expected to be closed in 12-18 months. ‘The segment contributed 5 per cent (Rs 3,590 crore) to the consolidated revenues and 6 per cent (Rs 403 crore) to the operating profits for the nine months till December 2017. The E&A business includes low and medium voltage switchgear, electrical systems, marine switchgear, industrial & building automation solutions and metering solutions. The manufacturing facilities of the E&A segment are located at Navi Mumbai, Ahmednagar, Vadodara, Coimbatore and Mysuru, along with Saudi Arabia, UAE, Kuwait, Malaysia, Indonesia and the UK. At Rs 14,000 crore, the segment is valued at 2.9 times of its sales estimated for FY18, which is comparable to the ratio of the listed peers like ABB, Siemens and Havells. When the deal closes in FY20, L&T is likely to receive Rs 11,200 crore as post-tax consideration. We believe this is a positive move from long-term perspective as it unlocks value within the existing business streams and allows the management to achieve the objective of optimum allocation of men, material and capital. Divestment proceeds would be used to retire debt and invest in high growth areas such as defence, real estate development, smart infrastructure, among others. (This article is linked to our coverage of Larsen & Toubro) Disclosure: Sachin Kumar did not own shares in Larsen & Toubro or Larsen & Toubro as on the date of publication of this report. Independent Advisors LLP and its associates did not own shares in Larsen & Toubro or Larsen & Toubro as on the date of publication of this report. ‘To view the latest stock holdings of the current Value Research Stock Advisor team, click here, hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 29187sprog Value Research Stock Advisor - Larsen & Toubro L&T continues to fire on all cylinders The engineering major posted stellar results for the quarter ending December 2017, with the highest ever order inflow in a quarter MOHIT KHANNA + 31% January 2018 arsen & Toubro’s growth momentum continues as the company posted y-o-y revenue growth {for at least 15 straight quarters. Improved execution in infrastructure, hydrocarbon, heavy engineering and services businesses led the growth in consolidated revenues for the quarter ending December 2017. The company's international business contributed 35 per cent to the FY18 third quarter revenues. ‘The company won fresh orders worth Rs 48,130 crore from multiple sectors largely supported by government's expenditure. This quarterly order inflow was the highest in the company’s history. ‘The current order book stands at Rs 2.71 lakh crore (8 per cent higher y-0-y). Here's a snapshot of the latest quarterly results: + Consolidated revenues were up 9.4 per cent to Rs 28,747 crore. + Diluted earnings per share increased 53 per cent to Rs 10.57. + Improved operating efficiency and better fixed-cost absorption helped increase EBITDA margin by 124 basis points to 10.81 per cent. The ongoing government spending should translate into more order inflows, in our view. International business will also remain on the growth track as higher oil prices help Middle-East countries - where L&T has the maximum exposure. The management remains focused on the higher-margin business and operating efficiencies to enhance return on equity for the shareholders. All growth percentages are compared to the same quarter of the previous year, unless otherwise stated, (This article is linked to our coverage of Larsen & Toubro) Disclosure: Mohit Khanna did not own shares in L&T as on the date of publication of this report. Independent Advisors LLP and its associates did not own shares in L&T as on the date of publication of this report. ‘To view the latest stock holdings of the current Value Research Stock Advisor team, click here, hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 30157sprog Value Research Stock Advisor - Larsen & Toubro The L&T juggernaut on a roll The company has posted higher revenues, improved margins and excellent execution skills in the quarter ending September 2017 MOHIT KHANNA + 15" November 2017 ‘The engineering behemoth Larsen & Toubro (L&T) brushed aside any indication of a slowdown with earnings per share (EPS) growth of 27 per cent (y-0-y) in the quarter ending September 2017. Sharp cost-cutting shaved off overheads as margins expanded to 9.5 per cent from year-ago levels of 7.5 per cent. L&T’s order book now stands at 2.3 times its FY17 revenues. Here's a snapshot of the latest quarterly results: + Consolidated revenue was up six per cent, from Rs. the infra and heavy engineering segment. 9,022 crore to Rs. 26,447 crore, driven by + EPS increased 27 per cent, from Rs. 10.22 to Rs. 12.96. + Cost-cutting initiatives yielded profit margin (before tax and exceptional items) of 9.5 per cent versus 7.7 per cent last year. + New order inflow of Rs. 28,732 crore took the order book to Rs. 2,57,526 crore, or 2.3 times consolidated FY17 revenues. ‘The management continues to divest non-core assets and sold its cutting tools business last quarter. It is looking to sell the Rs. 15,000-crore electrical and automation business that has, attracted the attention of global engineering giants. But despite these excellent results, fresh order inflows were missing momentum due to the Goods and Services Tax (GST) transition issues, bid deferrals and delay in awarding contracts. The government is stepping up with the recent announcement of an ambitious Rs 7 lakh-crore road construction plan and the river interlinking projects. L&T has maintained its revenue guidance of 12 per cent (y-o-y) increase for FY18 even as it battles lower orders. Net profit is up 26 per cent for the half year ended September 2017 and it includes profit on divestment of non-core subsidiary. All growth percentages are compared to the same quarter of the previous year, unless otherwise stated. (This article is linked to our coverage of Larsen & Toubro) Disclosure Mohit Khanna did not own shares in L&T as on the date of publication of this report. Independent Advisors LLP and its associates did not own shares in L&T as on the date of publication ofthis report. To view the latest stock holdings of the current Value Research Stock Advisor team, click here, hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 31187sprog Value Research Stock Advisor - Larsen & Toubro L&T - Infrastructure Investment Advantage The advantage provided by private and public infrastructure investment to L&T MOHIT KHANNA + 27 October 2017 ihe share of infrastructure investment in the government budget increased from 16 per cent in 2000 to 23 per cent in 2005. Thereafter it fell continuously over the next decade. Nonetheless due to the growing size of the budget as a whole, absolute capital investment grew between 2000 and 2017 (albeit with major fluctuations). Capital Investment and L&T Orders = Govt CAPX 04 05 06 07 08 09 10 The story of private capital investment is one of slowing growth, from a peak of 48 percent CAGR in 2006-2008 to just 1% in 2014-17. This slowdown has more than offset growth in government capital investment exerting downwards pressure on L&T’s orders. Despite this, L&T’s order growth remained in double digits or high single digits. A revival in animal spirits with the passage of key government reforms such as GST should encourage a revival in private capital investment. Capital Investment Growth and L&T Orders ‘Avg.CAPEX PVL.CAPEX LAT's order Govt’ CAPEX share oF Govt. (CAGR) intake Q@SCAGR) Budget (9) 00 (%6CAGR) Phase 1 FY2000-05 18 12 21 23 Phase 2 FY2006-08 33 38 57 37 Phase 3 FY2009-13 a7 54 9 14 Phase 4 FY2014-17 13 60 2 13 Source: | Ace Equity, L&T This article is linked to our coverage of L&T) hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 32187sprog Value Research Stock Advisor - Larsen & Toubro Disclosure: Mohit Khanna did not own shares in L&T as on the date of publication of this report. Independent Advisors LLP and its associates did not own shares in L&T as on the date of publication ofthis report. ‘To view the latest stock holdings of the current Value Research Stock Advisor team, click here, hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 33157sprog Value Research Stock Advisor - Larsen & Toubro Snapshot NSE Price Change 1 1 Day P/E P/E Dividene Yield 71,384.25 Z11.45 | 0.83% 22.24 3.28 1.17% As on 2-41-2019 0919 Detailed Quotes ust 1pav prev EXCHANGE & TIME HT canta oven REY votune 1-DAY RANGE NSE 27-Mar-2019 09:19 1,384.25 083 1379.00 137280 7,073 1,376.00- 1,384.50, BSE 27-Mar-2019 0933 1,3870 115 137630 137210 16389 1,376.30 - 1,390.75, About The Company Key Facts Business: Construction of utility projects Incorporated: 1946 Chairman: AM Naik Managing Director: SN Subrahmanyan Group: L&T 1g: NSE: LT, BSE: 500510 Headquarters: Mumbai, Maharashtra Website: www.larsentoubro.com hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t Market Cap: € 1,92,454.12 Cr Revenue (TM): 1,36,751.25 Cr Earnings (TM): 9,776.22 Cr Cash: % 17,496.78 Cr Total Debt: & 1,07,524.08 Cr Promoters’ Ownership: Liquidity: High 52 Week Range: ¥ 1,182.50 - 1,459.70 Face Value: 82.00 Shares Outstanding: 1,40,26,24,569 34187sprog Value Research Stock Advisor - Larsen & Toubro Price Graph — Larsen & Toubro — SEPBSE-Sensex — S&P BSE Inia nrastucture YID im 5m ty 5) Sy oy Al From | 77-Mar-2018 | Te | 27-Mar-2019 Py] 10% = voy sass sevs Nowe 28 Marto “as Nd ant9 n Stock Performance Trailing (%) ‘Annual (%) re SEY supase —SEPBSENOIA veg, «ASSEN sup gse sa se nO PERIOD roygql SENSEX INFRASTRUCTURE oun SENSEX INFRASTRUCTURE yo “450 6.00 4342018 1403587 127 Amonth 8456.28 1376 2017 39902791 35.22 3 350 725 ere 2006 465 195 178 months 201s saa 5.05 860 1 Year sai 1565 880 2014 39882989 ~ 3Years 18.28 14.66 1093 2013 120 898 : 5Yeus 1004-1158 = 2012 e116 2554 - 10Years 16.64 14.34 As on 26-Mar-2019 hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 35157sprog Value Research Stock Advisor - Larsen & Toubro Essential Checks Altman Z-Score 1.83 PiotroskiF-Score 3 Modified C-Score 1 Is there a threat to this How well has this company Can creative accounting be company’s solvency inthe done in the past one year? detected through the financial future? numbers? Likely Below Average No 1.83 3 1 Valuation s year Price to Earnings Price to Book Earnings Yield 22.24 3.28 EBIT/Enterorise value ——— 1793528 sos 2.16 3.36 asr PEG Min Median Max = Min Median Max Price/ Earnings to growth ratio Key Ratios Revenue © Cr) EPS @) 1504 % « tI Il ° 0 Merié Mara? Mant Maris Marié Mari7 Mara hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 8.03% Dees" 38157sprog ° “sk 5 10 MortS— Mara6 Value Research Stock Advisor - Larsen & Toubro RoE (2%) Cash flow from operations (& C1) Mort? Mart® Dect Marsa Mais Mart6 Marat Mars “TTM (Trailing Twelve Months) data based on income statement of last 4 quarters and interim half yearly balance sheet. Key Ratios and Highlights GROWTH (%) ANNUAL (TTM) Revenue Operating Profit Net Profit EPS Book Value KEY RATIOS (%) PARTICULARS: Operating Margin Net Margin Return on Equity Return on Capitat Debt to Equity (x) (QuaRreRty 00 yor mst 24.22 9953471 -1007 35.24, “847-3691 AVERAGE SYEAR ——_S-YEARS 16.96 1736 6.16 5.89 1465 14at s181 11.87 hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t ANNUAL (TT) 1-YEAR S-YEARS 1788 12.08 25.92 19.26 2095 26.06 19.61 29.49 10.72 10.79 ANNUAL (TT) TM 20180501 18.12 1785 706 6.80 1746 16.04 - 1273 134 194 seeARs 995 961 995 694 10.43 aov7oso 16.61 621 aas7 1150 1.88 37187sprog Value Research Stock Advisor - Larsen & Toubro Financials Annual Consolidated Income Statement Operating Revenue Other Income Total Income = Total Expenditure Increase/Decrease in Stock Raw Material Consumed Power & Fuel Cost Employee Cost Other Manufacturing Expenses General and Administration Expenses Selling and Distribution Expenses Miscellaneous Expenses Operating Proft Interest Por Depreciation PaT & Exceptional Items Exceptional Items hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t T™ = MARIB MARAT. 1,36,751.25 1,19,683.16 1,09,311.81 170845 4375951492415, 1,38,459.70 1,24,059.11 1,10,803.96 1,13,685.09 102,697.44 92,650.88 ~ 427891 103.28 40,792.17 36,648.54 ~ 439453 1,423.19 1529248 13,853.97 - 32,23743 29,906.38 656038 6,282.93 1,086.80 856.63 661256 3,575.96 2477461 21,361.67 18,153.08 871257 791678 7.01722 16,062.04 13,444.89 11,135.86 210174 1,928.73 2,369.95 1396030 11,516.16 8,765.93 29475 123.00 121.43 MaR-a6 41,01,122.48 919.90 1,02,042.38 85,431.57 516.26 35,320.19 1,243.45, 13,330.84 26,709.94 6,263.40 790.04 2,289.97 1661081 6898.68 9.71243 1,786.75 1925.40 94.22 Maras 92,004.58 1,083.52 93,088.10 76,329.88 693.96 31,969.24 1,074.48 11,931.31, 23,263.20 591191 804.87 2,068.78 16,758.27 7265.78 9,492.49 2,622.95 6,869.54 34770 MAR ze 85,128.40 1,040.46 86,168.86 71,101.05 $3753 29,748.92 1,157.69 10,499.82 22,556.99 5,364.94 640.74 1,669.48 15,067.81 6,494.26 8.57555 1445.82 TAD073 355.25 38157sprog Profit before Tax Provision for Tax Prof ater Tax Minority Interest, Share of Associate Consolidated Profit Liat Shareholder's Funds Share Capital Share Warrants & Outstandings Total Reserves Minority Interest Non-Current Liabilities Long-Term Borrowings Deferred Tax/Payment. Liabilities Other Long Term, Liabilities Long Term Provisions = Current Liabilities Short Term Borrowings ‘Trade Payables Other Current Liabilities Short Term Provisions 14,255.05 447883 9.77622 a.t1128 -1058 8,654.36 56,546.66 280.44 56,066.22 “1,111.28 77,396.60 75,526.90 616.14 723.45 530.41 1,21,956.11 34,734.83 2,726.74 Value Research Stock Advisor - Larsen & Toubro 11,639.16 3,198.87 8.44029 63457 435.86 7,369.86 55,656.99 280.27 356 55,059.60, 5,625.00 72,366.16 T2914.76 42192 523.54 1,09,273.22 19,331.85 37,194.96 48,915.40 3231.01 hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 888736 2,006 59 6,880.77 44427 395.27 6,041.23 50,216.52 18659 49,726.68 3,563.60, 67,140.21 67,340.58 398.23 526.60 89,525.12 16,534.47 30,294.86 39,787.69 2,908.10 3019.62 2436.96 5,582.66 311.82 990.16 4,232.88 44,180.36 186.30 43,711.84 2,892.84 61,234.61 61,223.84 322.54 424.66 85,046.43, 14,896.75, 27,003.56 40,759.11 238701 721724 2.25324 4,964.00 20132 214 476482 40,909.07 185.91 40,418.06 4,998.62 70,561.03, 68,468.76 1,276.1 41,000.80, 79,096.62 16,729.39, 24,649.64 32,116.29 5,601.30 7482.98 2.60758 4875.40 38.16 9.25 4,902.00 zr sayiet 185.38 37,149.44 3,179.18 60,275.71 58,411.64 337.46 4024.11 502.50 70,190.00, 13,858.52 20,849.88, 3020794 5,273.66 39157sprog Total Liabilities Assets Non-Current Assets Fixed Assets Lease Adjustment Ne Capital Work in Progress Intangible assets under development Non Current, Investments Long Term Loans & Advances Other Non Current Assets Deferred tax asset - Current Assets Inventories Currents Investments Cash and Bank Trade Receivables Short Term Loans and Advances Other Current Assets Total Assets Total Debt" Net Current Assets hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 2,61,776.46 45,077.40 24,808.71 223811 11,114.40 1,823.70 68,155.88 1,55,873.77 6,193.53 14,061.86, 751273 33,224.58 613.46 94,26761 2,61,776.46 33,917.66 Value Research Stock Advisor - Larsen & Toubro 244,415.43 1,06,683.13 14,234.33 2,143.07 11,300.36 10,192.92 68,198.13, 61432 1,494.06 1,36,238.24 484780 9,464.25 8.03253, 34,654.08 4797701 31,262.57 2,44,415.43 1,07524.08 26,965.02 211,570.65 88,604.20 13,063.85, 1,944.71, 11,353.23, 9,066.05 52,318.75 85760 41,125.20 1,21,841.25 4139.74 14,300.22 5,305.96 28,688.97 42,658.08, 26,748.28, 2,11,570.65 93,953.95 32,316.13, 1,94,090.67 85,901.69 14,175.70 179053, 9,183.92 7,970.89 52,2170 56355 736.43 1,07,452.55 4854.21 7494.19 5,389.91 26,024.98 26,878.28 36,810.98 1,94,090.67 88,135.49, 22,406.12 1,95,749.98 99,633.38 34,9742 239.36 4,883.03 10,109.75, 1,646.80, 4788422 468.72 184,64 95,834.76 6,508.40 7,965.32 5,756.21 30,089.37, 21,171.56 24,343.90, 41,95,749.98 93,629.55 16,738.14 41,71,356.50 zr 83,663.27 32,636.82 239.36 4,165.31 10,013.21 1,432.79 35,528.37 224,65 87,594.71 552747 6,676.16 4,096.57 26,384.55 20,445.56 24,464.40 4,71,356.50 83,812.27 17,404.71 40187sprog Contingent Liabilities Cashflow Cash From = Operating Activities ‘fit Before Tax. Adjustment Changes In working Capital Tax Paid Cash Flow from Investing Activities Cash from Financing Activities Net Cash Inflow / Outflow Ratios Financials Adjusted EPS (Rs) Cash EPS (Rs) ‘Adjusted Book Value (Rs) Dividend per Share (Rs) Cash Flow per Share (Rs) Free Cash Flow per Share (Rs) Profitability 61,70 61.70 418.97 147 Value Research Stock Advisor - Larsen & Toubro 21,228.73 19,853.33 -10,031.02 6,655.26 11,516.16 8,765.93 1,731.98 2,488.97 “19,875.72 -1,39797 “340344 -3,201.67 3,914.50 9,795.94 9,370.46 2,895.93 35394-24475 5259 437 7399 66.10 3949035667 1600 21.00 7158 n34 0837 5226 hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 18,745.40 -3,239,59 7,925.40 2,559.48, “10,509.78 “3,214.69 4,626.56 7,252.70 613.45 30.29 5274 314.18 18.25 -34.78 “8011 3,210.92 “1,365.38 6,869.54 332797 2,979.24 “477815 7,902.86 1,759.33, 347 54.41 290.40 16.25 “1469 “1199 1,492.00, zr 714277 7A2773 4056.58 -15,380.42 946.66 13,435.63 482.99 35.26 45.46 26768 -7706 -172.90 nissprog ROCE (%) ROE (%) ROA (%) Operating Margin (6) Net Margin (%) Cash Profit Margin (6) Growth Revenue Growth ~% Operating profit Growth (%6) Net Proft Growth (6) EPS Growth (%6) Book Value Growth (%) Solvency Debt to Equity Short term deat to equity Current Ratio Quick Ratio Interest Coverage Operating Efficiency Debtors to sales ~% Asset Turnover Receivable days hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 17.46 04 18.12 706 1788 25.92 2095 19.61 134 0.62 1.28 2.64 2430 056 83.35 Value Research Stock Advisor - Larsen & Toubro 12.73 16.04 372 1785 6.80 8.65 949 1768 22.66 21.83 1087 1.94 3473 1.25 1.20 247 28.95 053 96.45 11.50 14.67 341 16.61 621 B41 8.10 9.28 23.5 4250 13.70 1.88 3293 136 131 227 26.25 054 9077 a1a9 13.23 287 16.43 547 723 991 088 12.46 “1135 841 201 33.72 126 121 216 25.74 052 100.42 11.32 12.78 2m 18.21 533 818 8.08 11.22 1.82 “3.08 8.80 234 4089 121 13 199 32.70 ost ant 12.60 13.83 3.08 1770 5.66 736 11.59 “718 “622 11.76 225 36.75 125 aay 245 30.99 054 104.96 42187sprog Value Research Stock Advisor - Larsen & Toubro intr Days Ma Beam tose esa Papbiedoys amie nu9s8 asst tos tots Geincomerion orgy ag tsa taaaa vation Dice /Eaings == ah HSS Nek ho Price / Book Value 3.28 3.32 295 258 3.95 37 bivaenavewts) 447k tgs evsion nao a6 wets tas ate Close Price (Rs) 1,437.55 1,310.90 1,049.93, 811.13 1,146.43, 847.93 High Price (Rs) 1,470.00 1,470.00 1,076.67 1,258.67 1,262.53, 868.17 LowPrceQi) —«AN82S0=«408473—7850=r7s = aRaD SLAB Market Cap(Rs Cr) 1,92,45412 1,83,845.15 1,47182.23 1,13,289.03 159,789.69 1,17,961.91 “TTM (Trailing Twelve Months) data based on income statement of last 4 quarters and interim half yearly balance sheet, hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 43157sprog Annual Standalone Income Statement Operating Revenue Other Income ‘Total income = Total Expenditure Increase/Decrease in Stock Raw Material Consumed Power & Fuel Cost Employee Cost Other Manufacturing Expenses General and Administration Expenses Selling and Distribution Expenses Miscellaneous Expenses Operating Prost Interest peor Depreciation PBT & Exceptional Items Exceptional Items Profit before Tax Provision for Tax Value Research Stock Advisor - Larsen & Toubro ™ 83,107.17 2,532.10 85,639.27 74,610.07 11,029.20 1,578.86 9,450.34 1,048.61, 840173, 698.44 9100.17 2,354.66 Mana 74,462.55 4822.38 79,284.93, 69,705.92 1,010.73 31,701.76 1,009.83, 5,713.59 24,399.81, 3,732.22 96.07 4,063.37 9,579.01 1,697.70 7881.31 1,049.46 6,831.85 43053 7,262.38 1,875.08 hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t MaRa7 65,723.86 0.26 6790412 59,299.65 14789 27,328.99 410075 5.14738 2035001, 3,795.06 93.17 1,336.40, 8,604.47 4,525.41 7079.06 1215.19 5,863.87 893.97 675784 1,304.10 Manas 6317726 2411.49 65,588.75, 57,209.69 71.66 27,389.19 97738 4974.80 18,741.55 3,684.72 93.03 1.27736 8,379.06 1,686.32, 6,692.74 99740 5,695.34 560.28 6,255.62, 1,256.04 Maras 5701741 2,403.78 59,421.19, 50,489.51. 205.26 25,324.98 685.60 4,162.46 16,793.14 2,904.30 149.63, 674.66 8,931.68, 1579.47 738221 4,008.15 6,344.06 35716 6,701.22 1,645.04 MAR zr 56,598.92 2,104.67 58,703.59 50,023.44 20 24,031.75 656.73 4,656.90 16,762.27 2,933.40 161.80 71039 8,680.15 1,208.32 TATLB3 792.42 6,679.41 588.50 7.26791 1774.78 44157sprog Profit after Tax Liabilities Shareholder's Funds Share Capital Share Warrants & Outstandings Total Reserves Minority Interest Non-Current Liabilities Long-Term Borrowings Deferred Tax/Payment. Liabilities Other Long Term. Liabilities Long Term Provisions = Current Liabilities Short Term Borrowings ‘Trade Payables Other Current Liabilities Short Term Provisions Total Liabilities Assets Non-Current Assets hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 6,745.51 48,390.11 280.44 48,109.67 6,396.43, 5,819.95 111.97 46451 67,218.73 12,717.09 1,318.91 41,22,005.27 32,21795 Value Research Stock Advisor - Larsen & Toubro 5,38730 49,174.25, 280.27 356 48,781.83, 5,677.32 5,495.16 109,91 47287 6035783 429.57 3109744 23,660.96 1,470.9 1,15,610.02 35,639.33, 5ASB74 46,012.74 186.59 45,648.90, 741217 7134.28 92.43 470.68 48,528.31 2,312.50 24,338.32 20,738.59 1,138.90 1,02,238.44 31,853.75 4999.58 42,135.31, 186,30 41,706.78 8,606.11 8312.47 78.28 371.50 48,723.39 4175.98 22,215.92 21,407.67 923.82 99,620.95 32,373.67 5,056.18 37,084.58 185.91 36,646.11 9,336.04 8,508.60, 362.99 119.62 344.83, 42,026.90 3,791.08 18,850.60, 45, 46 4,066.76 88,44752 29,568.49, 5,493.13 zr 35,661.83, 185.38 33,152.75 6,281.24 5478.14 409.92 93.57 299.61 38,361.51 3,876.04 16,345.45 16,026.50, 2,113.52 78,304.58 cr 27,136.73 48157sprog Value Research Stock Advisor - Larsen & Toubro Fes Ase 05065640555 oars 126847 748048767787 es - - - ~ 3007 Gentivowh agp sag sunsasaz as eae ae - 200,77 201.25 158.91, 189.50 150.55 underdevelopment Racy 2400737 7546824 047551 1963476 T7282 1516841 long Termtoans & — 5.947.25 4,63258 4,028.24 © 4,584.22 3,825.30 3,721.57 avances Cen Cr 5,396.88 419.09 500.33 474.09 141.40 62.78 dssets Deere ox asset ~ mngr 85221568 : = = GentAssets 8587934 7957007 7o08847 67,051.14 lvertres 299572 280008 176286 © 195511. 272498255 ae 900457 454498 698208 480552 ss8n08 4046.25 Cashand Bank «366478 «431787 «383572 357026 so 178286 TradeRecenables 2582475 2445424 1991951896775 D50SL41 7553876 Short Term Loans Seren 86131 8,452.80 7,935.95 8443.80 8,034.73 6,345.57 Other Current 45,440.03 35,500.14 29,962.91 29,350.90 18,574.16 15,418.66 Assets Total Assets 1,22,005.27 1,15,610.02 102,238.44 99,620.95 8844752 78,304.58 Total Debt* = 10,561.00 10,558.37 13,924.48 12,936.59 11,458.92 Net Current Assets 18,660.41 19,212.24 24,571.16 1836775 16,799.70 12,753.10 Contingent 4461546 4066198 5oae478 1582255 1023236 castow te cash Fom = Operating = 2gsia1 597969 529986 S798 104724 hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 48157sprog Profit Before Tax Adjustment Changes In working Capital Tax Paid Cash Flow from Investing Activities Cash from Financing Activities Net Cash Inflow / Outtow Ratios Financials Adjusted EPS (Rs) Cash EPS (Rs) Adjusted Book Value (Rs) Dividend per Share (Rs) Cash Flow per Share (Rs) Free Cash Flow per Share (Rs) Profitability ROCE (%) ROE (%) ROA (1) Operating Margin % Net Margin (%) hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 48.09 48.09 356.65, 4a7 13.83 0.06 33.27 788 Value Research Stock Advisor - Larsen & Toubro 6831.85 1,106.63 “3,352.97 1,633.70 1,787.06 489.36 1,249.51 38.44 45.93 350.11 16.00 21.06 13.89 1541 1135 496 1286 679 5,863.87 1,027.80 60749 “1,519.47 46.44 6,073.16 139.91 3897 4185 32753 21.00 64.09 69.97 1471 12.43 5.42 13.09 8.03 5,695.34 710.58 “1,489.83, 1,616.23 “1,522.25 “2,464.33 686.72 35.78 4292 299.83 18.25 35.43 3671 1498 a2 15.26 762 6,344.06 670.5 247118 “1,725.05 1,884.08 “1,436.56 202.66 36.26 43.49 263.67 16.25 33.54 31.63 1743 1444 6.06 15.66 ast 6,679.41 54785 4,208.23 “1,976.79 al 32 504,05 336.97 39.51 45.21 239,26 1130 1152 2043 4773 729 9.36 astsprog Cash Profit Margin ~% Growth Revenue Growth ~ Operating profit Growth (%6) Net Profit Growth ~% EPS Growth (%6) Book Value Growth (%6) Solvency Debt to Equity Short term debt to equity Current Ratio Quick Ratio Interest Coverage Operating Efficiency Debtors to sales (%) Asset Turnover Receivable days Inventory Days Payable days Cash Conversion Cycle Valuation hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 167 2473 60.75 60.58 oz 0.26 1.28 1.23 6.76 28.67 072 9763 1193 109.56 Value Research Stock Advisor - Larsen & Toubro 863 1330 11.33 “1.22 “135 7.04 022 840 132 128 5.28 32.84 069 108.54 1043 15755 38.58 10.06 408 269 9.08 391 at 023 5.03 144 141 5.43 3031 0.66 10705 10.23 9.18 “31.89 9.40 10.80 619 “142 “133 13.95 033 991 1.38 4m 30.02 068 120.47 12.09 128.95 331 1054 074 290 “795 8.22 1052 035 1022 1.40 135 5.24 4043 069 141.38 13.49 4167 11.00 9.66 534 11.40 1597 034 2151 133 128 701 38.06 076 140.96 1292 104.70 49.18 48157sprog Price / Earnings Price / Book Value Dividend Vila (%) EV/EBITOA Close Price (Rs) High Price Rs Low Price (Rs) Market Cap (Rs Cr) 2853 as aa7 2568 145755 1470.00 1,182.50 Value Research Stock Advisor - Larsen & Toubro 3413 375 12 1986 4131090 1470.00 4103473 1,83,843.12 1799 1511 sat 2.70 133 150 1792 1476 104993 81.3 1,076.67 1,258.67 785.20 67737 147,182.21 1,13,289.02 31.60 435 095 1917 1,146.43 126258 82800 1,59,789.64 247 355 12 1470 24793 868.17 4514s 1,17,961.94 “TTM (Trailing Twelve Months) data based on income statement of last 4 quarters and interim half yearly balance sheet. hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 49157sprog Quarterly Consolidated Income Revenue Other Income Total Income Total Expenditure Operating Profit Interest Exceptional tems Por Depreciation Per Tex Profit ater Tax Minority Interest Share of Associate Consolidated Proft Equity Capital Ratios Adjusted EPS (Rs.) Operating Margin (%) Net Margin (%) Value Research Stock Advisor - Larsen & Toubro pecs 35,708.87 60639 36,315.26 29,736.34 657892 251107 406785 44895 3,61890 420015 2418.75 32066 5647 2041.62 280.44 1456 18.42 6.66 SeP-18 32,08083 42527 32,506.10 26,522.65 5,985.45 218694 29475 4991.26 51551 357575 886.12 2,689.68 36292 96.22 2230.49 280.44 1591 18.65 827 hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t Jung 28,283.45 24403 2352748 25,71514 aa1234 2019.80 2.79254 64439 2476s 93458 41,21307 25722 25893 1.2478 280.35 867 a701 425 Mara 40,678.10 45276 111086 33,710.96 7399.90 199476 5,405.14 49239 491275 145798 345477 17048 116.82 516747 280.27 2.60 18.19 8.40 eca7 28,74745 21396 28,961.39 2407759 4,883.80 1,889.38 1375 298087 45449 2526.48 73124 1,788.94 12790 471.06 1,489.98 280.21, 10.63 16.99 618 sepa7 to 26,446.76 399.65 26,846.41 21,964.21 4,882.20 191337 13674 3,108.57 43059 267438 54394 2,181.04 -200.42 0.74 1,819.88 280.11 zr 1299 18.46 794 50157sprog Quarterly Standalone Income Revenue Other Income Total Income Total Expenditure Operating Proft Interest Exceptional tems PeoT Depreciation Per Tex Profit ater Tax Equity Capital Ratios Adjusted EPS (Rs) Operating Margin (%) Net Margin (%) Value Research Stock Advisor - Larsen & Toubro pecs 22,342.98 88700 23,229.98 20,202.69 302729 48856 2538.73 26832 2.27041 635.63 1166 1355 704 SeP-18 18,648.76 7379 1937255 16,989.76 2,382.79 36974 49679 2,509.84 25953 2250.31 496.60 175871 280.44 1251 1278 9.05 hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t Jung 15,173.69 34671 15,720.40 15,935.42 178498 346.96 283 274.80 o11.80 280.35 6.50 11.76 Mara 2696174 37460 2731634 23,482.20 3834.14 373460 19882 3659.36 26651 339285 94763 2445.22 280.27 1745 14.23 895 eca7 171798 446331 18,164.29 16,045.48 2aisat 33049 5680 1945.12 26498 1.58014 358.19 122195 280.21 372 11.96 673 sepa7 to 15,862.53 65929 1652182 1455215 14,969.67 36728 17491 1,77130 259.48 151782 355.88 a61.94 280.11 tr 830 1242 703 51157sprog Value Research Stock Advisor - Larsen & Toubro Peers Financial Peer Chart Chart for: Operating Revenue 1254 Peer Comparison ‘COMPANY NAME Larsen & Toubro Kalpataru Power Trans MEP Infrastructure Rites Sadbhav Infrastructure Project @ Larsen & Toubro. @ Kalpataru Power Trans MARKET cp ey 1,92,454 6,799 801 4999 3,061 Kalpataru Power Trans REVENUE eR) 136,751 6555 2,896 1,804 3,362 5 2 d | | | Ner. PROFIT wer) 9,776.22 369.25 e134 399,00 145.44 hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t Rites oo a_ ne Maran RE * 7081746 sso 1304 2064139 noo. 1782 ws = PRICE TO. EARNINGS. 22.24 18.41 12.03 1253 PRICE TO BOOK 3.28 228 325 2.04 “716 52187sprog Value Research Stock Advisor - Larsen & Toubro Ownership Shareholding Pattern © vis @ Fis @ others 0 10 20 30 “© so Cy 70 80 so 100 Shareholders more than 1% ‘COMPANY NAME ‘carecony DEc-18 sep-18 JUNt8 | MARAB LIFE INSURANCE CORPORATION OF INDIA Public 1862 1790 1794 1796 HDFC TRUSTEE COMPANY LTD A/C - HDFC CHILDREN'S GIFT FUND - INVESTMENT Public 390 - - - PLAN SBI - ETF SENSEX Public 2.04 179 - - ICICI PRUDENTIAL LIFE INSURANCE SORTED Public 192 - 1.80 - [ADMINISTRATOR OF THE SPECIFIED UNDERTAKING OF THE UNIT TRUST OF Public 180 1.80 12 287 INDIA GENERAL INSURANCE CORPORATION OF ic 176 180 180 180 INDIA BHARAT 22 ETF Public 473 - - - RELIANCE CAPITAL TRUSTEE COLTD-NC pic Fy . . . RELIANCE CAPITAL BUILDER FUND 4 SR A hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 53157sprog Value Research Stock Advisor - Larsen & Toubro COMPANY NAME ‘caTEGoRY Decas seP-18 JUNB MARA. NOMURA INDIA INVESTMENT FUND. . MOTHER FUND Public 1.04 1.04 1.05 10s NPS TRUST- A/C SBI PENSION FUND SCHEME Public 1.02 - - - hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 54157sprog Value Research Stock Advisor - Larsen & Toubro Fund houses invested in the stock FUND HOFC Mutual Fund | Mutual Fund ICICI Prudentiat Mutual Fund Reliance Mutual Fund Kotak Mahindra Mutual Fund UTI Mutual Fund L&T Mutual Fund DSP Mutual Fund Aditya Birla Sun Life Mutual Fund Motilal Oswal Mutual Fund ‘axis Mutual Fund Franklin Templeton Mutual Fund Tata Mutual Fund Mirae Asset Mutual Fund Canara Robeco Mutual Fund IDFC Mutual Fund Invesco Mutual Fund Sundaram Mutual Fund JM Financial Mutual Fund BNP Paribas Mutual Fund Figures given above are % of equity capital Insider Trades oar PERSON 22-Mar-2019 SAURABH INDWAR 22-Mar-2019 SAURABH INDWAR pect 3.828 2013 1.695 1.280 0754 oma 0.663 ossa os4s 0431 0.400 0398 0358 0.225 0.170 0.39 oa2s 0.080 0.069 0.046 BUY / SELL Sell Sett hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t sepa8 was 3749 3833 1.906 1ait 1791 2.356 1.168 1078 0705 0.705 0688 0648 0642 0614 0535 0529 0.682 0933 0122 : oan 0.294 0.434 0.468 0348 0262 0202 0180 os10 oa17 0.098, 102 0.067 0113 0.091 0.095 0.060 0058 004s 0.082 TRANSACTION Te Market Market MARA beca7 4043 4.208 1615 1526 1.985 3.463 1.051 0.954 om 0.619 0575 os12 0.540 0.496 oss 0519 0.800 0.617 0241 0304 0.498 0.545 0.230 0219 078 0172 0.067 ort 0.098 0.092 0.085 0.053 0.070 0.098 0.061 0.182 0.029 018 PRICE —_VALUE @ RLAKHS) 139470 0.70 139470 2.79 55157sprog Value Research Stock Advisor - Larsen & Toubro ore peRson euryseu. —TUNSACTON Noor PRICE ALUE 22-Mar-2019. SAURABHLINDWAR sett Market 100 139470 139 22-Mar-2019 SAURABH INDWAR sett Market 100139470138 22-Mar-2019 SALRABH INDWAR buy Eso 3000 339470 4184 hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 58157sprog Value Research Stock Advisor - Larsen & Toubro hips hw. valueresearchstocks.comistocksrepert/2182/arser-ané-toubro-t 51187