L&T extends rally post Q2 earnings

Analyst at Prabhudas Lilladher maintains "Accumulate' rating on the stock with target price of Rs 1,025.

Larsen and Toubro (L&T) is trading higher by nearly 2% at Rs 963, extending its over 10% rally in past four days on BSE, after the company maintained its guidance for the current fiscal FY14 implying strong pick?up in execution and margin in the second half (October-March).

The stock has rallied 15% post July-September (Q2) earnings from Rs 837 on October 17 compared to 2.8% rise in the benchmark index.

Meanwhile, L&T has reported decent operating performance, with healthy execution, driven by export sales growth and a decent in?line margin performance despite shipbuilding and forex losses.

The company has maintained its guidance for FY14 at 20% order inflow growth, 15% sales growth and maintain EBITDA margin at last year’s level (10.5%) with +-50bps variation.

Kunal Seth, analyst at Prabhudas Lilladher, believe the guidance of order flow looks achievable, given the expectation of pick-up in infrastructure ordering in domestic market and strong traction in Middle East markets, both in infrastructure and hydrocarbon.

However, achieving guidance of execution and margin looks difficult, given the weak outlook in domestic market, he adds.

Analyst maintains “Accumulate’ rating on the stock with target price of Rs 1,025.