4QFY2013 Result Update | Infrastructure

May 22, 2013

Larsen & Toubro

Performance Highlights
Quarterly highlights - Standalone
Y/E March (` cr) Net sales Op. profit Reported PAT 4QFY13 20,294 2,451 1,769 4QFY12 18,461 2,561 1,865 3QFY13 15,429 1,475 1,029 % chg (yoy) 9.9 (4.3) (5.2) % chg (qoq) 31.5 66.2 72.0

BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others Abs. (%) Sensex LT 3m 2.2 3.5 1yr 25.2 30.4 36.3 21.0 42.7 3yr 22.0 (5.7) Infrastructure 93,427 7,344 1.2 1720/1106 200,322 2 20,062 6,095 LART.BO LT@IN

`1,517 `1,761
12 Months

Source: Company, Angel Research

Larsen and Toubro (L&T) posted decent set of numbers for 4QFY2013, which were broadly in-line with our expectation both on revenue and order inflows front. However, owing to higher-than-anticipated other income and lower tax rate PAT came in ahead of our estimate. L&T secured orders worth `27,929cr during 4QFY2013, taking the order book to `1,53,604cr (a growth of 5.4% yoy). Order inflows were mainly driven by major orders bagged in the infrastructure (28%), power (41%) and process (12%) segments. Performance in-line with estimates: On the top-line stood, L&T reported decent top-line growth of 9.9% yoy to `20,294cr which was in-line with our estimate of `20,303cr. The decent growth in revenues was mainly driven by pick up in execution in the engineering and construction (E&C) and machinery & industrial product segment. On the EBITDA front, performance was as per our expectations with the company reporting a yoy dip of 180bp to 12.1% in 4QFY2013 against our expectations of 12.0%. On the bottom line front, L&T reported PAT of `1,788cr a decline of 6.9% and was higher than our estimate of `1,573cr. The PAT was higher than our estimate mainly due to surge in other income and lower tax rate. Other income grew 19.2% yoy to `374cr for the quarter. Outlook and valuation: For FY2014, the management has given a guidance of 15-17% growth in revenue and 20% growth in order inflow and +/- 50bp on EBITDA margins. We believe given its robust order backlog, healthy order inflows during the past few quarters and strong execution capabilities, the company is well placed to achieve its guidance on the revenue front, given its robust order backlog. However, it would be difficult to achieve 20% growth on the order inflow front, considering the challenging macro environment. We believe L&T is best placed to benefit from a gradual recovery in the capex cycle, given its diverse exposure to sectors and a strong balance sheet. We maintain our Buy rating on the stock with a target price of `1,761. Key financials (Standalone)
Y/E March (`cr) Net Sales % chg Adj.Net Profit % chg EBITDA (%) FDEPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x) OB/Sales (x) Order Inflows % chg FY2012 52,545 20.7 3,937 19.7 11.8 64.3 23.6 3.7 16.7 17.3 1.9 16.1 2.8 70,574 (11.5) FY2013E 60,373 14.9 4,132 4.9 10.5 67.5 22.5 3.2 15.2 15.2 1.6 15.7 2.5 88,035 24.7 FY2014E 68,396 13.3 4,768 15.4 10.5 77.9 19.5 2.9 15.5 15.6 1.5 14.0 2.5 98,687 12.1 FY2015E 77,435 13.2 5,408 13.4 10.5 88.3 17.2 2.5 15.6 16.0 1.3 12.5 2.4 111,432 12.9

Viral Shah
022-39357800 Ext: 6842 Viralk.shah@angelbroking.com

Source: Company, Angel Research

Please refer to important disclosures at the end of this report

Larsen & Toubro | 4QFY2013 Result Update

Exhibit 1: Quarterly performance (Standalone)

Y/E March (` cr) Net Sales Total Expenditure Operating Profit OPM (%) Interest and Financial Chgs Depreciation Non Operating Income Nonrecurring items Profit Before tax Tax Net Profit before MI PAT (%) Minority Interest (MI) Adjusted net profit after MI Adj. PAT (%) Adj. FDEPS
Source: Company, Angel Research

4QFY13 20,294 17,843 2,451 12.1 281 222 374 19 2,341 553 1,788 8.8 1,769 8.7 28.9

4QFY12 18,461 15,900 2,561 13.9 121 180 314 55 2,629 708 1,920 10.4 1,865 10.1 30.5

3QFY13 15,429 13,954 1,475 9.6 238 200 437 93 1,567 445 1,122 7.3 1,029 6.7 16.8

% chg (yoy) 9.9 12.2 (4.3) (180)bp 132.1 23.2 19.2 (66.0) (10.9) (21.9) (6.9) (159)bp (5.2) (139)bp (5.2)

% chg (qoq) 31.5 27.9 66.2 252bp 18.1 10.9 (14.4) (79.9) 49.4 24.2 59.4 154bp 72.0 205bp 72.0

FY2013 60,873 54,466 6,407 10.5 982 818 1,851 248 6,705 1,794 4,911 8.1 4,132 6.8 67.5

FY2012 53,171 46,888 6,283 11.8 666 699 1,338 55 6,310 1,854 4,457 8.4 3,937 7.4 64.3

% chg 14.5 16.2 2.0 (129)bp 47.5 17.0 38.3 350.1 0.8 (3.2) 10.2 (31)bp 4.9 (62)bp 4.9

Exhibit 2: 4QFY2013 Actual vs Estimates

(` cr) Net Sales EBITDA Reported PAT
Source: Company, Angel Research

Estimates 20,303 2,436 1,573

Actual 20,294 2,451 1,769

Variation (%) (0.0) 0.6 12.5

Key highlights of the analyst meet

L&Ts management is fairly confident on delivering 20% growth on order inflows and 15-17% growth on the revenue front. The company is eyeing infrastructure (including roads, metro rails, DFC and airports), hydrocarbon, buildings and power T&D for getting orders. Further, L&T has removed slow moving orders worth `17,000cr from the order book in 4QFY2013 and is confident of getting orders worth `35,000cr-40,000cr in 1HFY2014. The company is hoping to increase its order inflows from outside India, from 13% currently to 20%. Despite heightened competitive intensity, management has clarified that it has enough levers at its disposal to ensure that the current EBITDA margin (+/-50bp) is maintained for FY2014. NWC continues to remain weak at ~16% of sales in 4QFY2013 compared to 12% in March 2012. The management believes that this should be the upper limit for the same in the light of the current scenario. For FY2013, the company has issued a bonus shares in the ratio of 1:2 and also has a declared a dividend of `18.5/share subject to shareholders approval.

May 22, 2013

Larsen & Toubro | 4QFY2013 Result Update

Top-line grew by decent 9.9%

On the top-line stood, L&T reported decent top-line growth of 9.9% yoy to `20,294cr which was in-line with our estimate of `20,303cr. The decent growth in revenues was mainly driven by pick up in execution in the engineering and construction (E&C) and machinery & industrial product segment.

Aggressive order book guidance

For FY2014, the management has given a guidance of 15-17% growth in revenue and 20% growth in order inflow. The guidance is mainly based on (a) high share of exports in both order inflows and revenues (power T&D and hydrocarbon) and (b) continued momentum in infrastructure segment (building and factories, railways, airports, etc). L&Ts order backlog currently stands at `1,53,604cr (excluding slow moving orders worth `17,000cr), indicating a growth of 5.4%.. Order inflow for the quarter increased by 32.0% yoy to `27,929cr, taking the order inflow for FY2013 to `88,035cr (up 24.7% yoy). However, management is confident of achieving order inflow of `100,000cr during FY2014. We believe although the company can achieve this guidance on the revenue front, given its robust order backlog, it would be difficult to achieve 20% growth on the order inflow front, considering the challenging macro environment.

Exhibit 3: Revenue growth momentum continues

25,000 26.1 21.0 21.4 23.5 22.4 17.3 30.0 25.0 20.0 15.0 10,000 11,245 13,984 18,461 11,955 13,195 9,483 5,000 0 1QFY122QFY123QFY124QFY121QFY132QFY133QFY134QFY13 Sales (` cr, LHS) Growth (yoy %, RHS) 10.3 15,429 9.9 10.0 20,294 5.0 0.0

Exhibit 4: Robust order inflows during the quarter

30,000 25,000 20,000 15,000 10,000 16,190 16,096 17,129 21,159 19,594 20,967 19,545 5,000 0 1QFY12 3QFY12 Order Inflow 1QFY13 3QFY13 Growth (yoy %, RHS) (30.2) 27,929 (21.3) 3.6 28.2 21.0 14.1 30.3 32.0 40.0 30.0 20.0 10.0 0.0 (10.0) (20.0) (30.0) (40.0)

20,000
15,000

Source: Company, Angel Research

Source: Company, Angel Research

May 22, 2013

Larsen & Toubro | 4QFY2013 Result Update

EBITDA margin in-line with estimates

On the EBITDA front, performance was as per our expectations with the company reporting a yoy dip of 180bp to 12.1% in 4QFY2013 against our expectations of 12.0%. For FY2013, the EBITDAM decline by 129bp yoy to 10.5% mainly on account of (a) increased in staff cost led by high employee base and annual salary revision, (b) MCO expenses was impacted by higher input costs and (c) higher SGA cost mainly due to non linear expense items. Going ahead, despite heightened competitive intensity, management has clarified that it has enough levers at its disposal to ensure that the current EBITDA margin (+/-50bp) is maintained for FY2014 and believes that EBITDAM should be looked at on a yearly basis rather than on a quarterly basis owing to volatility based on job mix.

Bottom line beats estimates owing to lower tax rate

On the bottom line front, L&T reported PAT of `1,788cr a decline of 6.9% and was higher than our estimate of `1,573cr. The PAT was higher than our estimate mainly due to surge in other income and lower tax rate. Other income grew 19.2% yoy to `374cr for the quarter.

Exhibit 5: EBITDA margin in line with estimates

3,000 2,500 2,000 1,500 1,000 1,126.5 1,174.1 1,367.6 2,561 1,087 1,406 1,475 2,451 500 0 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 EBITDA (`cr, LHS) EBITDAM (%, RHS) 11.9 10.4 9.8 10.7 9.1 9.6 13.9 12.1 16.0 14.0 12.0 10.0 8.0 6.0

Exhibit 6: PAT growth driven by higher other income

2,000 1,800 1,600 1,400 1,200 1,000 800 600 7.3 6.3 5.5 12.0

10.1
7.5 6.6 6.7 8.7

10.0 8.0 6.0 4.0

772.0

690.1

709.4

1,865

1,029

1,769

4.0
2.0 0.0

902

200 0

871

400

2.0 0.0

1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 PAT (` cr, LHS) PATM (%, RHS)

Source: Company, Angel Research

Source: Company, Angel Research

May 22, 2013

Larsen & Toubro | 4QFY2013 Result Update

Segmental performance
Engineering and construction (E&C): The E&C segment, which contributed ~90% to the companys gross revenue, witnessed strong traction in order inflows and recorded revenue of `18,392cr in 4QFY2013, registering a growth of 9.5% yoy. On the margin front, EBITDAM came in at 12.2% in 4QFY2013, a decline of 230bp yoy; owing to change in job mix and high input costs. The company secured orders worth `24,917cr (up 29% yoy) and `79,766cr (up 25% yoy) in 4QFY2013 and FY2013 respectively. This was mainly from infra sector (transportation, urban & water) and power sector (particularly T&D space). Machinery and industrial products (MIP): The MIP segment continued to witness pressures from persistent headwinds, ie sluggish demand in construction and mining sectors, and increased competition. The MIPs segment reported revenues of `745cr in 4QFY2013, an increased by 9.3% yoy; mainly driven by increased in export of industrial valves. The EBITDA margin came in at 16.3% (18.6%) in 4QFY2013 and was impacted by increased input costs and intense competition. Electrical and electronics (E&E): The E&E segment reported revenues of `1,117cr mainly due to sluggish demand, continuing competitive pressures and tight liquidity. However, the EBIT margin came in at 11.2% (up 428bp), owing to better realisation and favorable product mix.

Exhibit 7: Segmental performance

Y/E March (` cr) Revenues Engg & Const. (E&C) Mach. & Ind. Products (MIP) Electrical & Electronics (E&E) Others Intersegment revenue EBIT Engg & Const. Mach. & Ind. Products Electrical & Electronics Others Intersegment margins EBIT (%) Engg & Const. Mach. & Ind. Products Electrical & Electronics Others Capital Employed Engg & Const. Mach. & Ind. Products Electrical & Electronics Others Unallocable
Source: Company, Angel Research

4QFY13 20,784 18,392 745 1,117 381 150 2,421 2,065 105 146 105 11.6 11.2 14.1 13.1 27.6 38,219 14,971 596 1,281 850 20,520

4QFY12 19,141 16,794 681 1,143 275 248 2,582 2,290 159 112 32 (12) 13.5 13.6 23.4 9.8 11.8 35,570 10,980 596 1,363 850 21,780

3QFY13 15,819 13,882 593 886 338 119 1,685 1,280 161 99 145 10.7 9.2 27.1 11.1 42.9 39,806 15,355 563 1,384 714 21,790

% chg (yoy) 8.6 9.5 9.3 (2.3) 38.4 (39.5) (6.2) (9.8) (34.2) 30.1 223.7 0.0 (184)bp (241) bp (1,034)bp 428bp 1,581bp 7.4 36.3 0.0 (6.0) 0.0 (5.8)

% chg (qoq) 31.4 32.5 25.5 26.0 12.5 26.0 43.7 61.3 (34.7) 47.8 (27.6) 0.0 100bp 201bp (1,403)bp 295bp (1,527)bp (4.0) (2.5) 5.9 (7.4) 19.1 (5.8)

May 22, 2013

Larsen & Toubro | 4QFY2013 Result Update

Subsidiary performance
L&T InfoTech registers healthy performance
L&T InfoTech, the companys technology subsidiary, reported a healthy performance for 4QFY2013, registering a 24.4% yoy growth in revenue to `1,004cr. On the profitability front, the subsidiary PAT grew by 49.0% yoy to `202crin 4QFY2013, with PATM of 20.1%.

Order book analysis

L&Ts order backlog currently stands at `1,53,604cr (excluding slow moving orders worth `17,000cr), indicating a growth of 5.4%.. Order inflow for the quarter increased by 32.0% yoy to `27,929cr, taking the order inflow for FY2013 to `88,035cr (up 24.7% yoy). For 4QFY2013, ~15% of the orders came from the international market. As of 3QFY2013, L&Ts order book is majorly dominated by the infra (49%) and power (28%) segments. Process (10%), hydrocarbon (8%) and others (5%) constitute the remaining part of the order book. The company has given a guidance of 20% for order booking in FY2014, which is above our expectations considering the challenging macro environment. Client wise, 34% of L&Ts outstanding order book comes from the public sector and 53% comes from the private sector. Captive work orders account for the balance 13%. Notably, there has been a drop in the share of public sector orders in the past few quarters. However, the management expects good quantum of government orders going forward.

Exhibit 8: Higher-than-expected order inflow

(` cr) 30,000 25,000 20,000 15,000 10,000 5,000 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 Process Hydrocarbon Power Infrastructure Others Total 16,096 17,129 21,159 20,967 27,929

Exhibit 9: Order book composition (`1,53,604cr)

(` cr) 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 Process Hydrocarbon Power Infrastructure Others

19,594

19,545

Source: Company, Angel Research

Source: Company, Angel Research

May 22, 2013

Larsen & Toubro | 4QFY2013 Result Update

Outlook and valuation

We recommend Buy with a target price of `1,761
We believe L&T will continue to occupy a unique position in the Indian E&C space as a diversified and large engineering play, with exposure to areas ranging from power, defense, nuclear and equipment, in spite of short-term concerns. At the current market price of `1,517, the stock is trading at 17.2x FY2015E earnings and 2.5x FY2015E P/BV on a standalone basis. We have used the sumof-the-parts (SOTP) methodology to value the company to capture all its business initiatives and investments/stakes in different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to `1,761. We maintain our Buy rating on the stock. It may be noted here that the L&T stock has historically traded at a premium to the BSE Sensex. At our SOTP target price, the stock would trade at 15x FY2015E standalone adjusted EPS of `88.3, which is at a premium of 8% over Angels FY2015E Sensex P/E multiple of 14x and lower than the historical premium commanded by L&T over BSE Sensex.

Exhibit 10: L&T Parent historic P/E band

120% 100% 80% 60% 40% 20% 0% May-09 May-10 May-11 May-12 Nov-09 Nov-10 Nov-11 Jan-10 Jan-11

Mar-11

Jan-12

Mar-12

Mar-10

Jul-09

Sep-09

Jul-10

Sep-10

Jul-11

Sep-11

L&T Premium/(Discount) to Sensex

7YEAR AVG

5YEAR AVG

3YEAR AVG

Source: Company, Angel Research

On one-year forward P/E basis, historically L&T has traded at an average P/E of 22.0x, 23.0x and 23.8x over the past seven, five and three years, respectively. Thus, our implied target P/E multiple of 19.9x is way below its historical average to factor in the prevailing challenging business environment.

May 22, 2013

Jul-12

Larsen & Toubro | 4QFY2013 Result Update

Exhibit 11: L&T Parent one-year forward P/E band

45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0

5.0
0.0 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11

Feb-06

Feb-09

Feb-07

Feb-08

Feb-10

Feb-11

Feb-12

P/E

7YEAR AVG

5YEAR AVG

3YEAR AVG

Source: Company, Angel Research

Exhibit 12: Derivation of SOTP-based target price for L&T (FY2014E)

Business Segment L&T- Parent Infrastructure Subsidiaries IDPL (stake - 97.5%) Key Subsidiaries - Services L&T Infotech L&T Finance Key Subsidiaries - Manufacturing Tractor Engineers Associate Companies L&T MHI Boilers and Turbines (51%) Other Subsidiaries Satyam Stake Other Investments Total
Source: Company, Angel Research

Methodology P/E P/BV P/E Mcap Basis P/E P/E P/E Mcap P/BV

Remarks 16x FY2015E Earnings L&T acq. 2.36% stake of IDFC at Rs118cr in 1QFY11 10.0x FY2015E Earnings 20% holding company discount 5x FY2015E Earnings 5x FY2015E Earnings 5x FY2015E Earnings 20% holding company discount 1x FY2015E Book Value, Mcap

` cr 81,118 5,363 5,363 16,153 6,835 9,318 3,327 98 2,000 1,230 2,399 203 2,197 108,360

`/share 1,318 87 87 262 111 151 54 2 32 20 39 3 36 1,761

% to TP 74.9 4.9 4.9 14.9 6.3 8.6 3.1 0.1 1.8 1.1 2.2 0.2 2.0 100

Exhibit 13: Key assumptions (` cr)

FY2010 Order Inflow Revenue Order Backlog (Y/E) OB/Sales (x) 69,572 36,675 100,239 2.7 FY2011 79,769 43,540 130,217 3.0 FY2012 70,574 52,545 145,723 2.8 FY2013 88,035 60,373 153,604 2.5 FY2014E 98,687 68,396 168,258 2.5 FY2015E 111,432 77,435 183,718 2.4

Source: Company, Angel Research

May 22, 2013

Oct-12

Jun-06

Jun-09

Jun-12

Jun-07

Jun-08

Jun-10

Jun-11

Larsen & Toubro | 4QFY2013 Result Update

Exhibit 14: Angel EPS forecast vs consensus

Angel Forecast FY2014E FY2015E
Source: Company, Angel Research

Bloomberg Consensus 83.5 93.5

Variation (%) (6.8) (5.6)

77.9 88.3

Investment arguments
Best stock to play the Indian infrastructure theme: We believe L&T is best placed to benefit from the gradual recovery in the capex cycle, given its diverse exposure to sectors, strong balance sheet and cash flow generation as compared to its peers, which grapple with issues such as strained cash flow, high leverage and limited net worth and technological capabilities.

Company background
L&T - the largest Indian infrastructure conglomerate - is present across almost all the infrastructure segments and is at the forefront of the Indian infra growth story. Over the years, the company has diversified across various segments to encash the untapped infra opportunity, not only in India but in other geographies as well, and has an excellent track record of achieving the same. Over the past 10 years (FY2002-12), L&T has reported a CAGR of 21.3% and 29.1% in its top-line and bottom-line, respectively.

May 22, 2013

Larsen & Toubro | 4QFY2013 Result Update

Exhibit 15: Recommendation summary

Company ABL CCCL IRB Infra ITNL IVRCL JP Assoc. L&T NCC Punj Lloyd Sadbhav Simplex In. Unity Infra CMP 204 12 123 175 21 73 34 48 109 106 32 TP Rating FY12 255 Buy - Neutral 157 Buy 230 Buy 35 Buy 90 Buy 45 Buy 153 Buy 164 Buy 45 Buy 1,853 1,931 3,687 6,645 3,773 Top-line (` cr) FY13E 1,928 2,281 3,997 7,444 6,287 FY14E 2,234 2,492 4,312 8,041 6,836 9.8 13.6 8.1 10.0 34.6 8.2 13.2 11.3 12.2 32.2 12.0 12.0 16.0 (3.3) 16.7 26.8 (3.9) 2.2 67.5 3.1 (0.2) 1.5 14.1 12.7 EPS (`) 18.0 0.7 15.7 29.8 2.3 2.5 77.9 4.1 0.5 7.3 18.0 14.6 22.2 2.0 16.6 32.1 3.0 2.9 88.3 4.8 0.9 7.8 23.4 14.9 17.7 (0.3) 9.4 13.8 14.4 24.6 131.3 28.8 8.0 12.7 (3.5) 7.4 6.6 33.3 22.5 11.2 74.9 7.5 2.5 P/E 11.3 17.1 7.9 5.9 8.8 29.0 19.5 8.4 94.8 15.0 5.9 2.2 9.2 5.8 7.4 5.5 6.8 25.7 17.2 7.2 51.6 14.0 4.5 2.2 OB/ 2.3 2.2 2.4 2.2 4.9 2.5 3.3 1.9 3.3 2.5 2.0 CAGR (%) FY12 FY13E FY14E CAGR (%) FY12 FY13E FY14E Sales(x)

13,358 14,850 15,631 60,873 68,946 78,040 5,863 1,565 6,026 2,180 6,576 2,511 6,824 2,455 7,264 2,736 7,563 2,734

1,517 1,761 Buy

- Neutral 11,717 12,954 14,740

Source: Company, Angel Research

Exhibit 16: SOTP break-up

Company ` ABL CCCL IRB Infra ITNL IVRCL JP Assoc. L&T NCC Punj Lloyd Sadbhav Simplex In. Unity Infra 87 16 45 80 15 24 1,318 25 64 54 164 45 Core Const. % to TP 34 100 29 35 43 27 75 57 100 35 100 100 23 ` Real Estate % to TP 25 168 112 120 7 99 ` Road BOT % to TP 66 71 52 16 65 20 443 Invst. In Subsidiaries ` 57 25 % to TP 30 43 12 ` Others % to TP 13 48 27 Total ` 255 16 157 230 35 90 1,761 44 64 153 164 45

Source: Company, Angel Research

May 22, 2013

10

Larsen & Toubro | 4QFY2013 Result Update

Profit & loss statement (Standalone)

Y/E March (` cr) Gross sales Less: Excise duty Net Sales Other operating income Total operating income % chg Total Expenditure Net Raw Materials Other Mfg costs Personnel Other EBITDA % chg (% of Net Sales) Depreciation & Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (incl pft from Ass/JV) (% of PBT) Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Less: Minority interest (MI) Prior period items PAT after MI (reported) ADJ. PAT (excl. div from Subs) % chg (% of Net Sales) Basic EPS (`) (Reported) Fully Diluted Adj. EPS ( `) % chg

FY2010 FY2011 FY2012 FY2013E FY2014E FY2015E 36,675 43,540 360 9.1 366 18.6 37,035 43,906 32,259 38,266 15,740 10,675 8,721 2,379 3,845 4,776 21.8 12.9 416 4,360 20.6 11.9 505 2,026 34.5 5,881 49.2 135.7 6,016 27.3 4,376 4,376 4,151 54.1 11.2 72.7 68.9 49.9 9,396 2,830 5,295 5,640 18.1 12.8 599 5,040 15.6 11.6 619 1,147 20.6 5,569 (5.3) 332.9 5,901 32.9 3,958 3,958 3,289 (20.8) 7.5 65.0 54.0 (21.6) 52,545 625 53,171 21.1 46,888 11,175 10,747 3,666 12,527 8,772 6,283 11.4 11.8 699 5,583 10.8 10.6 666 1,338 21.4 6,255 12.3 55.0 6,310 29.4 4,457 4,457 3,937 19.7 7.4 72.8 64.3 19.0 60,373 500 60,873 14.5 54,466 12,028 14,472 4,436 14,581 8,948 6,407 2.0 10.5 818 5,589 0.1 9.3 982 1,851 28.7 6,457 3.2 247.6 6,705 1,794.0 26.8 4,911 4,911 4,132 4.9 6.8 80.2 67.5 4.9 68,396 550 68,946 13.3 61,714 17,788 13,789 4,902 16,547 8,687 7,232 12.9 10.5 912 6,321 13.1 9.2 1,027 2,038 27.8 7,332 13.5 7,332 1,961.9 26.8 5,370 5,370 4,768 15.4 6.9 87.7 77.9 15.4 77,435 605 78,040 13.2 69,824 20,212 15,608 5,441 18,730 9,833 8,216 13.6 10.5 995 7,220 14.2 9.3 1,137 2,230 26.8 8,314 13.4 8,314 2,224.5 26.8 6,089 6,089 5,408 13.4 6.9 99.4 88.3 13.4

1,574 10,070

1,640.9 1,943.6 1,853.8

May 22, 2013

11

Larsen & Toubro | 4QFY2013 Result Update

Balance sheet (Standalone)

Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Share App Money - warrants Reserves & Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Inventories Sundry Debtors Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 7,290 1,799 5,492 874 13,705 26,395 1,415 11,158 1,432 6,036 6,353 21,277 5,119 25,190 8,957 10,536 2,312 6,644 771 2,931 7,605 759 11,572 3,504 8,067 835 16,103 47,169 2,064 22,613 1,456 9,163 11,873 33,955 13,214 38,219 13,072 4,143 8,929 918 17,603 53,330 2,367 25,689 1,402 9,804 14,067 38,154 15,176 42,627 14,572 4,839 9,733 1,010 19,103 59,963 2,678 29,078 1,389 11,015 15,804 41,919 18,044 47,890 120 25 18,166 18,312 6,801 77 25,190 122 122 123 29,020 29,143 8,834 242 38,219 123 32,428 32,551 9,834 242 42,627 123 36,690 36,813 10,834 242 47,890 FY2010 FY2011 FY2012 FY2013E FY2014E FY2015E

21,724 25,101 21,846 25,223 7,161 263 9,896 133

29,271 35,252

14,685 15,872 35,010 43,457 1,577 1,730 8,225 1,777 1,905 9,128 12,428 18,730

11,049 11,918 27,839 32,441 7,170 11,016 29,271 35,252

May 22, 2013

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Larsen & Toubro | 4QFY2013 Result Update

Cash flow statement (Standalone)

Y/E March (` cr) Profit before tax Depreciation Change in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations (Inc.)/ Dec. in Fixed Assets (Inc.)/ Dec. in Investments Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY2010 FY2011 FY2012 FY2013E FY2014E FY2015E 6,016 322 1,143 (2,026) (1,641) 3,815 (1,494) (5,442) 2,026 (4,909) 28 245 (717) 2,194 1,750 657 775 1,432 5,901 514 (1,753) (1,147) (1,944) 1,571 (1,564) (979) 1,147 (1,396) (24) 360 (863) 650 123 298 1,432 1,730 6,310 619 (3,671) (1,338) (1,854) 66 (1,567) (1,187) 1,338 (1,416) 1 2,735 (996) (215) 1,524 175 1,730 1,905 6,705 573 (2,647) (1,851) (1,794) 986 (1,111) (231) 1,851 508 1 (1,062) (1,112) 230 (1,943) (450) 1,905 1,456 7,332 638 (2,016) (2,038) (1,962) 1,954 (1,583) (1,500) 2,038 (1,045) 1,000 (1,145) (817) (962) (53) 1,456 1,402 8,314 697 (2,881) (2,230) (2,225) 1,675 (1,592) (1,500) 2,230 (862) 1,000 (1,360) (466) (826) (14) 1,402 1,389

May 22, 2013

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Larsen & Toubro | 4QFY2013 Result Update

Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) Wcap cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage 0.3 1.1 8.6 0.2 1.0 8.1 0.3 1.3 8.4 0.3 1.2 5.7 0.3 1.2 6.2 0.3 1.1 6.4 5.8 14 104 192 229 5.4 12 98 213 242 5.5 12 107 217 257 5.5 12 124 207 262 5.6 12 128 198 258 5.6 12 128 195 258 19.7 21.7 27.0 18.5 20.3 16.4 17.3 18.8 16.7 15.2 16.3 15.2 15.6 16.6 15.5 16.0 16.8 15.6 11.9 72.7 1.7 15.1 5.5 0.4 18.7 11.6 67.1 1.7 13.2 5.9 0.3 15.1 10.6 70.6 1.7 13.0 5.5 0.3 15.1 9.3 73.2 1.7 11.7 7.7 0.3 12.8 9.2 73.2 1.8 11.9 8.1 0.3 12.8 9.3 73.2 1.8 12.1 8.1 0.3 13.1 68.9 68.9 75.8 12.5 299.4 54.0 54.0 63.9 14.5 358.8 64.3 64.3 75.7 16.5 411.9 67.5 67.5 80.8 16.6 475.9 77.9 77.9 92.8 19.7 531.5 88.3 88.3 104.6 16.6 601.1 22.0 20.0 5.1 0.8 2.7 20.6 3.9 28.1 23.8 4.2 1.0 2.2 17.4 3.4 23.6 20.0 3.7 1.1 1.9 16.1 2.9 22.5 18.8 3.2 1.1 1.6 15.7 2.6 19.5 16.4 2.9 1.3 1.5 14.0 2.4 17.2 14.5 2.5 1.1 1.3 12.5 2.1 FY2010 FY2011 FY2012E FY2013E FY2014E FY2015E

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Larsen & Toubro | 4QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

L&T No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

May 22, 2013

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