>LARSEN & TOUBRO: The leader takes it all

LT- MHI, Joint ventures start production
■ L&T and MHI has started the production at its facility in it newly set facility at Hazira. The JV’s (50% each) will have installed capacity to produce 4,000 MW of Boilers and Turbines annually.

■ Apart from these two factories, the company is also setting up dedicated factories for axial fans, air-preheaters, electrostatic precipitators, high pressure piping and a forge plant. We believe these units will increase the indigenization of the manufacturing of the overall BTG
units for L&T and would result in higher margins.

LT emerges as lower bidder for Hyderabad Metro Project
■ L&T has emerged as the lowest bidder for the Hyderabad Metro Project. The company has put in INR14.6bn as the Viability Gap Funding (VGF) which is the lowest. The project has a 5 year construction and 30 years concession period which can be extended by another 25 years.

■ Transtroy BEML constortium (VGF- INR22bn) and Reliance Infrastructure (VGF – INR29.9bn) were second and third in terms of lowest VGF.

■ The project will provide ~INR90bn of EPC opportunity for the company which will be executed over the next 5 years.

Order inflows to meet guidance – 25% growth for 1QFY11
■ Based on the announced orders we believe the company is well positioned to have a 25% order inflow growth – as per guidance.

■ We estimate that the total order inflow for the quarter would range from INR106bn to INR129bn implying a 11.2-35% growth in order
inflow.
■ Our base case for order inflow stands at INR118bn translating into 24% order inflow growth.

Target upgraded to INR2,097
■ The strong order inflow for the last 4 quarters and strong execution in 4QFY10 would take the company to a high growth trajectory.

■ We have revised our target price from INR1,781 to INR2,097 on 1 year rolling basis and INR2,186 on FY12 basis.

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