Tuesday, November 10, 2009

[Investors Please Listen] L&T secures Rs16.4 bn orders for Balance of Plant Package


L&T has received a turnkey order worth Rs16.35 bn from Madhya Pradesh Power Generating Co. for the entire BoP package at 2x600 MW Malwa Coal Fired Thermal Power Plant. The order entails design, engineering, manufacture, supply, erection and commissioning of BoP systems including coal handling plant, ash handling plant, effluent treatment plant, cooling tower, chimney, civil works, etc. With the above order, L&T has bagged orders worth Rs374 bn YTD (FY09 order intake – Rs520 bn).

Management has given definitive guidance order inflow growth at 30% for FY10E against ball-park growth of 25-35% earlier. This implies growth of +40% yoy in H2FY10E to achieve its 30% growth guidance of FY10E. Our assessment of investment spends in India indicates healthy but lower growth momentum in FY09-12E (16% CAGR) versus FY04-08 cycle. Hence, we maintain that it will be an uphill task for L&T to secure +40% growth in order inflows in H2FY10E to achieve its 30% growth guidance

At CMP the stock is trading fairly at 27.0X FY10E and 22.5X FY11E consolidated earnings of Rs58.9 and Rs70.8 per share respectively. We have a HOLD rating on the stock.


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