Take L&T, the biggest Engineering & Construction company in India and its net profit:
Year | Net Profit |
---|---|
1996 | 389 |
1997 | 411 |
1998 | 531 |
2006 | 1317.21 |
2007 | 2240.14 |
2008 | 2325.36 |
Thus average profit for 1996-1998 was 443.66 and average profit for 2006-2008 is 1960.9. Thus growth over ten years is 16% per annum while inflation rose at a rate of 6.36% during the time 1995-2005 (@ Inflation Index). The same company is commanding a market cap of 83K crore right now at bourses even after correcting 35% from its top of 130K crore. This is a P/E of 35.7 at the current price and 56 at the peak.
If you see, consolidated earnings growth was meagre 4% in the last year (standalone rose by 55% from 1403 to 2173 crore). Even if we assume it grows by 30% in year 2008-09 and 25% in 2009-2010 the P/E will still be 27 and 21 at the current price in 2010. And P/E will surely come down as the growth slows down, as already seen in IT companies.
No comments:
Post a Comment