LARSEN AND TOUBRO
Reco price/date: Rs 1,375/July 24
Current/target price: Rs 1,381/Rs 1,265
Larsen and Toubro (L&T) reported a strong Q1FY13 with a revenue growth of 26 per cent and a subdued overall margin, hit primarily by MTM losses and change in job mix. Order inflow for the quarter was robust at Rs 19,600 crore aided by deferred orders to the tune of Rs 3,800 crore. Change of mix in favour of infra segment from high-margin, big-ticket hydro-carbon, power & process segments is likely to be margin dilative, and analysts have cut FY14 margin estimates by 30 basis points. The key upside risks include dilution/divestment of stake in IDPL/projects, faster-than-expected cut in interest rates and large overseas orders. Maintain Sell.
JAIPRAKASH POWER VENTURES
Reco price/date: Rs 34/July 23
Current/target price: Rs 32/Rs 43
Jaiprakash Power Ventures’ Q1FY13 pretax profit was up 135 per cent and marginally ahead of analysts’ estimates. The net profit was higher, thanks by lower taxes in this quarter. Revenue growth of 98 per cent year-on-year was driven by contribution from complete commissioning of Karcham Wangtoo. Management highlighted that generation would have been higher-than-reported by 30 per cent had the monsoons been on track. Karcham Wangtoo (one Gw) generated 1.3 billion units in the June quarter and will continue to sell power at merchant rates till the PPA dispute with PTC is resolved. Maintain Overweight.
Barclays Equity Research
Reco price/date: Rs 222/July 23
Current/target price: Rs 206/Rs 265
According to media reports, the Mumbai Metropolitan Region Development Authority (MMRDA) has initiated the process of barring Simplex Infra from taking up the agency’s work for two years. The debarment process has been initiated as Simplex Infra had failed to observe safety norms in the Lalbaug Flyover project from which a concrete slab fell in April 2012. There have been several mishaps at sites where the company has carried out or is carrying out work. The latest one being on the Eastern Freeway, that Simplex is constructing, which collapsed on Thursday, July 12, 2012, killing one person and injuring seven. If a ban for two years is imposed by MMRDA or a penalty is levied on Simplex Infra it would be negative for the company. Maintain Buy.
DOLPHIN OFFSHORE ENTERPRISE
Reco price/date: Rs 79/July 24
Current price/Fair value: Rs 77/Rs 100
Dolphin Offshore Enterprises (Dolphin) received an EPC order worth Rs 270 crore in March 2012 after two dry years. Though analysts are upbeat about the growth prospects of domestic oilfield equipment and service providers, given Dolphin’s dependence on ONGC for the order flow, technical and infrastructure incapability to execute greenfield EPC projects, intense competition and stretched working capital cycle, they have maintained their fundamental grade of 2/5. CRISIL Research expects Dolphin’s consolidated revenues to increase by 78 per cent to Rs 360 crore in FY13 with new orders and higher revenues from charter business. CRISIL Research expects net profit of Rs 22 crore and EPS of Rs 13.3 in FY13. The ability to bag new orders remains a key monitorable.