L & T Buy on dips

Larsen & Toubro Ltd is a name known to most people. It is one of India's leading engineering and construction company. Let's see what is its business and how it operates:

Revenue segregation: Its business operations are categorised in three segments, as given below:

a) Engineering & Construction (E & C) segment

b) Electrical & Electronics Segment

c) Material Handling & Industrial Products

L & T has performed robustly in all its parameters over the last 10 years. Its impressive fundamentals in the past form a strong base for its future.

L&T has clocked an impressive CAGR of 67 per cent in its EPS (earnings per share) which has been possible due to the strong investment back into the business which is evident from its high BVPS (book value per share) CAGR of almost 50 per cent. Also, it has improved its margins over the years from a stagnant average of 10 to 11 per cent from FY 03 to FY 06 to 15 per cent in the last 4 years. In fact in 2010 the company's operating margin has increased to 19 per cent.

It's sales have registered a CAGR of 19.6 per cent over the last 10 years, indicating a good order inflow over the years. Over the past 5 years the CAGR of order inflows has been 33 per cent. This has helped the company register an impressive 67.2 per cent CAGR over the last 10 years.

The company has been witnessing an increase in order inflows since the past few months. Order inflow for the quarter ended June 2010 was Rs 15626 crore, up 63 per cent on y-o-y basis. The company expects increased bidding activities in the next few months and expect this momentum to continue. As of June 2010 the company has a healthy order book of Rs 1,00,239 crore to be completed over the next 2 to 3 years. Recently, the company bagged 2 projects worth Rs. 1200 Cr. from ONGC to set up additional processing units at its plants. Hence, this is expected to ensure good revenue growth in the coming quarters.

L & T is one of the leading players in the Indian engineering industry. It is poised for good growth in future considering the government focus and spending on infrastructure & power, its strategic plans and capacity expansions. But it needs to work on a plan to manage its operating inefficiencies.

The scrip has been a slow performer for the past 1 year and is expected to do better going forward

Time Span	Price	Change	%Change
Today	1,790.05	-8.35	-0.46
Week	1,800.55	-2.15	-0.11
Month	1,658.55	139.85	8.43
Three Months	1,703.90	94.50	5.54
Six Months	1,649.05	149.35	9.05
One Year	1,902.20	-103.80	-5.45

The company has a strong support around 1600 levels while 2000 range would be huge resistance, getting past it can go to 2500 mark swiftly. Buy for Portfolio and long term !

Bought to you by

Ingenious Investor
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Ravina Consulting
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Buy L & T

L&T is in diversified business activities with a great future potential. It is also cost effective & profitable. “The management is highly professional and it is not a family business. The company is expected to do very well due to its presence and dominance in most of the infrastructure-related areas,” informs Atul Surana, Certified Financial Planner & MD of Mangalore-based Catalyst Financial Planning.

OUR RECOMMENDATION :

L&T has always been an investors delight. Buy on dips and hold for a target price of 2500 in a years time. The stock is consolidating around 1600 levels and is poised to jump to next level after the Q3 results.

In a weak market it does not all much unlike other stocks which gives a support to move up once the market trend moves up

Bought to you by

Ingenious Investor
Equity Research Division

Ravina Consulting
No.429 Mahavir Tuscan
Near Hoodi Circle, Whitefield
Mahadevapura Post
BANGALORE 560048
+91.9880080321

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Buy Larsen, Tata Steel and Tulip Telecom

Larsen & Toubro
Broking House: Edelweiss
Current Price: Rs 1,607.70

Engineering major Larsen & Toubro’s management is bullish on power, oil & gas, infra sectors, which it considers to be growth drivers. The company maintains a guidance of 25-35 per cent YoY growth in order accretion in FY10E, driven by the oil and gas (O&G), power and infrastructure verticals, especially from public sector companies. In infrastructure, L&T is looking at opportunities in the roads, railways and water sectors. L&T has a capex plan of Rs 1,500 crore-Rs 2,000 crore in FY10E. The broking house feels L&T is a default India infrastructure play, with pick-up in government spending and recommends a ‘hold’ position.

Tata Steel
Broking House: Emkay Research
Current Price: Rs 438.30

Tata Steel has reported below estimate results with net sales standing at Rs 26,430 crore, down 26.7 per cent. The company has posted a adjusted net loss at Rs 1,040 crore (yoy profit Rs 1,520 crore) as it had to bear a restructuring cost of Rs 4,090 crore. As per the management, the prices in Europe have bottomed out and there may be technical restocking which may push up the prices. At the same time, Corus is also taking various measures to reduce cost of production. The outlook on Indian operations is optimistic and management has guided for 20-25 per cent volume growth in FY10 and the broking house maintains a “hold”.

Tulip Telecom
Broking House: Angel Broking
Current Price: Rs 897.95

Tulip Telecom Ltd is a data telecom service and IT solutions provider. The company has recorded a 12.8 per cent yoy growth in its Q4FY09 topline, while sequential growth came in at 5.9 per cent. In the IP VPN business, a key growth driver for the company was the increase in bandwidth requirements of its customers, and the business saw strong growth in demand from the media, telecom, the government and manufacturing sectors. The total number of connects grew by an excellent 71.2 per cent yoy and by over 14 per cent qoq, to cross the two lakh figure. Going ahead, the broking house expects Tulip to record CAGRs of 21.6 per cent and 16.7 per cent in its topline and bottomline, respectively, over FY2009-11 and recommends “accumulate” position.

Free float on NSE

Free-Float Methodology Mean?

A method by which the market capitalization of an index’s underlying companies is calculated. Free-float methodology market capitalization is calculated by taking the equity’s price and multiplying it by the number of shares readily available in the market. Instead of using all of the shares outstanding like the full-market capitalization method, the free-float method excludes locked-in shares such as those held by promoters and governments.

Calculated as:

FFM=Share Price x (No. of Shares Outstanding – Locked In Shares)

Free-Float Methodology means:

The free-float method is seen as a better way of calculating market capitalization because it provides a more accurate reflection of market movements. When using a free-float methodology, the resulting market capitalization is smaller than what would result from a full-market capitalization method.

Free-float methodology has been adopted by most of the world’s major indexes, including the Dow Jones Industrial Average and the S&P 500.

Conversely, once the Nifty shifts to free-float methodology, weights of companies like Reliance, ICICI Bank, L&T, HDFC, ITC and HDFC Bank would increase considerably, while weights that of companies with high promoter stake such as Wipro, DLF, ONGC and NTPC would fall drastically.

Dashes Expectations leads to Crash in NSE and BSE

Disappointed with the interim budget presented today, the Indian markets steadily declined until the end of the trading session thus closing deep in the red. The Sensex closed lower by around 340 points, while the Nifty closed lower by around 100 points. Stocks from the mid-cap and small-cap indices too ended the day on a negative note. Stocks from the metal and capital goods sectors led the pack of losers today. Rupee closed at 48.79 against the US dollar. The Asian markets ended on a mixed note today. The European indices are currently trading weak.

As per a leading business daily, demand for power has fallen by around 600 MW during the period April 2008 to January 2009 as against the corresponding period last year when it had increased by 4,500 MW. The demand for power declined from 106,943 MW to 106,336 MW during the period under consideration on account of slowdown in the industrial consumption due to the current economic crisis. It may be noted that the Ministry of Power had estimated the electricity demand to increase to 859 bn units by 2012, if India were to maintain an 8% GDP growth rate, while to maintain a 7% GDP growth rate it would require an electricity demand of around 820 bn units. However, currently India’s power demand stands at around 730 bn units as against a generation of around 666 bn units of power annually. Any further weakening of demand for power may adversely affect power equipment manufacturers like L&T and BHEL, as the healthy demand for power equipment in the past few years has been largely due to the continuously increasing demand for power in the country. The stocks of L&T and BHEL ended the day on a weak note.
As per a leading business daily, ONGC and other state-run explorers will pay refiners Rs 320 bn as subsidies for selling fuels below cost for FY09. This amount will be part of the compensation for PSU refiners like IOC and HPCL which may lose revenue of about Rs 1 trillion during the year. In January 2009, the PSU retailing companies were making a profit on petrol and diesel. However, those gains were wiped out by losses on kerosene and cylinder of LPG. The refiners will get bonds from the government to cover the remaining amount for which all accounts will be settled at the end of FY09. The stock of ONGC, HPCL and IOC ended the day on a weak note.

As per the interim budget announced today, despite the severe global financial crisis, India recorded a 45% YoY growth in foreign direct investment (FDI) between April and December 2008. It received an FDI inflow of US$ 23.3 bn during the period. This even though during FY08, India's FDI inflow was already a robust US$ 32.4

NTPC's nuclear foray
The markets continued to trade in the negative territory on account of sustained selling activity witnessed during the previous two hours of trade. Stocks from the power, engineering and construction sectors are leading the pack of losers, while select stocks from the media, auto and FMCG sectors are trading higher. The overall decline to advance ratio is poised at 2:1 on the BSE.

As per a leading business daily, the government may soon put in place norms for monitoring prices of costly imported patented medicines for diseases such as diabetes, arthritis, obesity, cancer and heart diseases. Once finalised, the new norms will see the government negotiating prices for imported medicines for identified diseases based on prices of the same medicine in other markets and the estimated cost of production. The companies would be expected to voluntarily keep prices lower in India for other imported patented drugs. Though this move is aimed at increasing the affordability of these medicines for consumers, the same would prevent MNC companies such as GSK Pharma, Eli Lilly, Roche, Aventis and Pfizer from selling their drugs at a huge premium in the country.

Power stocks are trading lower led by Reliance Power, Power Grid Corporation and NTPC. As per a leading business daily, NTPC and Nuclear Power Corporation of India (NPCIL) has signed a MoU to form a joint venture (JV) company that will set up nuclear power projects in India. NTPC would hold around 49% stake in the JV, while the remaining would be with NPCIL. It may be noted that NPCIL is the sole agency generating nuclear power in the country with a capacity of about 4,120 MW. Total nuclear power generation in India is estimated to be around 20,000 MW by 2020. This move would help NTPC to gain presence in the nuclear power segment which is expected to witness strong focus by the government going forward.

Source : Equitymaster.com