Bagged largest EPC Order – L&T

Update on the Indian Equity Market:

On Wednesday Nifty closed 1.9% lower at 13,568. Among the sectoral indices, FMCG (+0.3%) was the only sector that closed higher. PVT Bank (-3.1%), Bank (-2.9%), and FIN Services (-2.8%) led the indices that closed in the red. Tech M (+2.6%), SBI Life (+2.3%), and Wipro (+2.0%) closed on a positive note. Tata Motors (-4.4%), Tata Steel (-4.3%), and Titan (-4.2%) were among the top losers.

Excerpts from an interview of Mr. SN Subrahmanyam, MD & CEO, L&T with CNBC-TV18 dated 27^th January 2021:

• Speaking about the Q3FY21 results, Mr. Subrahmanayan said the company received a record order inflow of Rs 73,000 crores.
• L&T bagged it’s largest EPC order of Mumbai – Ahmedabad high speed 2 packages at Rs 32,000 crores and India’s largest bridge order for Rs 2,900crores.
• Speaking about sales, he said the company touched previous years same quarter number (Q3FY20), the number fell short of Rs 600-700 crore.
• Looking at the growth in orders the momentum is back.
• The high margins are sustainable as there are levers to save ahead.
• Working capital has fallen and cash inflows have improved. The company has total debt of Rs 1,85,000 crores. The company has paid Rs 10,000 crores in Q3FY21 and the debt has now come down to Rs 1,75,000 crores. Out of this Rs, 91,000 crore is L&T Finance Holdings debt.
• The company has not utilized its entire debt, the board at the start of the year took a decision to keep cash of Rs 35-45,000 crores due to uncertainties.
• Speaking about the realty sector, he said properties in Bangalore, sea woods, and Mumbai had done well in December 20. The company will not invest inland, but only in the construction part.

Consensus Estimate: (Source: market screener and Investing.com websites)

• The closing price of L&T was ₹ 1,358 as of 27-January-2021.  It traded at 20x/18x/16x the consensus Earnings per share estimate of ₹ 67.9/73.7/86.8 for FY21E/FY22E/ FY23E respectively.
• The consensus average target price for L&T is ₹ 1,481/- which implies a PE multiple of 17x on FY23E EPS of 86.8/-.

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