L&T Beats Street Expectations

Capital goods major L&T has exceeded the street expectations by posting 17 per cent topline growth to Rs 13,195 crore. The company reported a strong 17 per cent growth in its largest segment viz. engineering & construction (E&C) to Rs 11,633. The revenues of the electrical & electronics (E&E) segment grew moderately by 7 per cent to Rs 839 crore. The machinery & industrial products (MIP) segment reported a decline of 10 per cent to Rs 531 crore.

The company had earlier said that it will post a rise in the operating margins in the September quarter and the same has been achieved. Its EBITDA margins during the quarter rose by 188 basis points to 14.02 per cent on a YoY basis. The margins have also shown improvement for the half year ended September 30, 2012. Over this robust expansion of its margins, L&T posted a 42 per cent jump in its net profit to Rs 1,137 crore. Excluding the exceptional item of stake sale gains, the company still posted a 15 per cent growth in the bottomline to Rs 915 crore.

The order book position as of September 30, 2012 is robust at Rs 1,58,528 crore while the order inflow at Rs 20,967 crore recorded an impressive growth of 30 per cent on a YoY basis. A majority of the orders came from the building & factories, infrastructure and hydrocarbon sectors. In the total order inflow, 21 per cent of the orders came from international customers. What impresses us is the 31 per cent growth in the order inflow in its E&C segment to Rs 19,136 crore. The international demand in the E&E segment remains sluggish while that in the MIP segment remains weak due to the high input costs.

The company said that during the quarter many sectors witnessed a slowdown in growth rates due to high inflation, uncertain recovery in the global economy and tight liquidity conditions. Towards the end of the quarter, industrial production rebounded and a good credit demand was also seen. The management has also said that the government’s reform measures will accelerate the pace of economic development which will be positive for the company. We expect the growth momentum to continue. We have recommended the scrip to our readers and they should hold the scrip as we expect further upward momentum in its price.