Credit Suisse downgrades L&T to underperform

Last Updated: Wed, Nov 07, 2012 09:44 hrs

Credit Suisse downgrades Larsen & Toubro to 'underperform' from 'neutral', on concerns about deteriorating order flow mix and rising working capital cycle, which could impact margins and cash generation.

Over 40 percent of L&T's orders are from the Middle East and real estate segments which are "prone to execution delays" and would earn lower margin.

It would be difficult for L&T to sustain this growth momentum on its historic high inflows, Credit Suisse said in a note.

Credit Suisse believes L&T is expensive at 17.5 times FY14 parent EPS for 10 percent EPS CAGR (FY12-14E) and also does not expect any material improvement in return on equity.

At 11:25 p.m., shares were up 0.81 percent at 1,679 rupees.

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