Angel Broking has maintained `Buy` on Larsen & Toubro (L&T) with a price target of Rs 1,607 in its report dated March. 05, 2012. The broking house gave the following rationale:
Larsen & Toubro`s (L&T) construction arm bagged new orders worth over Rs 13.06 billion under various divisions during February 2012. The power T&D segment secured orders worth Rs 5.14 billion from various clients, which includes a major order from Power Grid Corporation for the construction of a transmission line. The buildings and factories division won orders worth Rs 4.51 billion for the construction of residential towers and for civil, structural and mechanical erection works for the construction of a cement plant. L&T construction also secured an order worth Rs 2.2 billion for the construction of 23MW Solar PV plant on EPC basis in Rajasthan.
Lastly, Rs 1.21 billion order was received from Kolkata Metro Rail for the construction of 2.7km viaduct, station building and other related works.
At the CMP of Rs 1,299, the stock is trading at PE of 18.3x FY2013E earnings, which is below the historical trading multiple for L&T. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in the different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs 1,607, which provides 23.7% upside from current levels. Hence, we maintain our Buy rating on the stock.
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