L&T Wins Rs. 1635 Crore Order from Madhya Pradesh Power Generating Company Ltd (MPPGCL) for 1200 MW Balance of Plant Package (BoP) for Shree Singaji (MALWA) Thermal Power Plant.
L&T has been winiing contracts - I guess for some time now - its not getting converted to revenue at same pace!! I dont know what is cash-flow situation of this co.. There must be some reason why this script is `dead`. It is very complex business structure as well. They own tech business, etc etc.. Any one has some study on this? Yes, in long term I am positive on this - just need to cross check with views.
Thanks Bharat.. Valuation of this script is so tough!! yep - only due to what you stated, it enjoys such a high PE.. also, nothing around to compare. But, realisation of revenues is not coming along as much of order bookings. Lets see. I am still holding on - not given up yet..
Hello lion407
L&T is an Engineering company in private sector Like BHEL in public sector. The products are not made and kept for sale. They are made to order (Specifications) and called projects. They have a manufacturing unit where electrical switches are made.
L&T is now undertaking big projects like Heavy machines Fly overs, Bridges, Thermal Power generation units,Neuclear power equipments (recently undertaken for submarine) Coal mining equipments etc.
Recently L&T received orders for Power generation Units from Maharashtra and Madhya Pradesh. These units are to be designed and completed by L&T. Constructing a culvert on the road take minimum 15 days as such how much time it will take to complete these projects. It requires highly skilled Engineers, Workers, Administrators, and Managers etc.
There will be payment terms to execute the order. It is a complex activity both in finance and execution.
Getting such a big order is a plus point. L&T is one of the competitive companies in the world to undertake such work.
You may feel L&T script is now “dead”. When compare to the present market trend and the volume I feel it is active may be for “kill”.
Hi tunga: Thanks for informative write-up. It helps. I am still having my holdings intact. Everyone understand L&T is in long cycle business and hence realisation of actual #s may take time, but then - why there is no movement at all in this script? Are there any issues in cash-flow beyond published balance sheets we see? These questions come along when due to obvious reasons and very likely I am wrong.
Hello lion407
You asked a very tricky question. Market sentiments on the script and the actual functioning of the company have no relationship. If you don`t mistake me Market is mad. The purchase and sale price go on some predictions and other market sentiments.
I had seen earlier some script where the company was loosing the script soaring at very high level.
It is always better to buy hold “A” group known scripts for investors like us.
This script will move up shortly.
The issue in first quarter was about the order book growth as it did not grow on par with market expectations.
In second quarter the issue was solved.
but revenue growth was not as expected due to the clearance delay of various contracts.
But the company will definitely show huge boost in balance sheet from Q4 onwards.
So if u hold this stock for next 6 months t0 1 year we can see above 2000 levels.
It is a good question Lion. But understand that contracts which are won now may yeild revenues and cash flows lets say in 4 th quarter or may be next FY. Any given day this stock is the best bet. Someone has written it will cross 2100 mark. He is right. This is a good buy at current levels also.
I fully agree with you Mr. Tunga. There are many activities involved in completing a project. There are also deferred payment terms in the contracts. Unless projecte is fully executed as per the contractual terms no customer will make a final payment. This is the problem in major contracts. L & T only is the capable of handling such projects.
Thank you Sirs.. On technical side - weekly its still fine, on daily charts, just couple of days ago it has broken 20 DMA and came out - may be ready to go up. Lets see.
anirudhdiptiman : I am so glad, I am not getting any -ve vibes of this script!! Almost 10% of my LT is in L&T - based on similar views, however, just wanted to see what experts out here feel.
Just yesterday IIP no.s were released.
Capital goods has shown significant growth.
Its good news for L&T.
We can hope for good set of no.s from next quarter.
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