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This is an archive article published on October 14, 2011

BofA downgrades L038;T stock

Bank of America BofA has downgraded engineering major Larsen and Toubro stock from 'buy'.

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Bank of America BofA has downgraded engineering major Larsen and Toubro Lamp;T stock to 8216;neutral8217; from 8216;buy8217; and cut the target price to Rs 1,660 from Rs 2,100.

The engineering conglomerate is likely to miss its FY12 order inflow guidance and report weaker earnings growth,and see a decline in return on equity,BofA said in a note.

A proxy to India8217;s infra amp; industrial capex,Lamp;T has enjoyed premium multiples. However,shares may de-rate now as we see the firm8217;s FY11-14E EPS CAGR slowing to 15 pct vs 19 pct during FY08-11.

Its RoE likely decline due to the capex in lower-RoE infra assets and stranded capacities,said BofA.

Our new target price is 11 pct below consensus and our parent EPS are 5-8 pct below consensus 8211; reflecting our perception of downside risks,added the bank. at 9:55 a.m. shares of Lamp;T were flat at 1,419.30 rupees.

 

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