Right Time to Buy Larsen & Toubro
Investors can consider taking advantage of recent market volatility to add the stock to their portfolio.
India’s largest engineering conglomerate, is better-positioned to weather risks such as firm commodity prices and a possible slowdown in industrial production. The recent announcement of a one-off loss in commodity hedging is unlikely to have any lasting impact on the company’s long-term growth prospects. At the current market price, the stock trades at 27 times estimated consolidated earnings for FY09.
We would suggest long term investors to buy this stock and invest with at least a five-year perspective to allow the company’s entry into high-potential segments such as shipyards and power equipment to flow through to earnings.
Improving operating profit margins
L&T’s order book of about Rs 50,000 crore spans sectors such as hydrocarbons, urban infrastructure and power. Presence in similar segments across geographies is also an added advantage. L&T has been consistently improving its operating profit margins, even as most of its peers feel the heat from spiraling steel prices.
Company managing rising costs
A better product mix, with focus on high margin sectors such as oil and gas and process industries such as minerals, metals and refineries has aided the company in managing rising costs.
Entry into boilers and turbines segment
L&T’s entry into the highly lucrative super-critical boilers and turbines segment through a joint venture with Mitsubishi appears well timed, as there are no strong domestic contenders other than BHEL, at present.
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[...] Enjoys New Orders worth Rs. 1687 Crore Posted by admin April 13, 2008 Larsen & Toubro has bagged four orders worth Rs 1,687 crore from the Government of Rajasthan, Bhushan Steel-Orissa, [...]