L&T’s Margins Under Pressure In Q4FY13

Construction & engineering major, L&T posted a very disappointing set of numbers for the quarter ended March 31, 2013. The company's total income grew by a mere 10% on a yearly basis to Rs 20294 crore, which was way below the street’s expectations of 14%. The net profit of the company also fell short, and came in at Rs 1769 crore against the expectations of around Rs 1950 crore.

The reason for such a dismal financial performance, as explained by the management, is certain sectoral bottlenecks that moderated the pace of project execution. Following this result, the shares of the company plummeted and closed 5.5% below the previous closing.

Besides this, the company also saw pressure on its EBIDTA margins, which came in at 12.1%, down by a staggering 180 basis points from 13.9% in the corresponding quarter of the previous year. Even in absolute terms, the EBIDTA was lower by 4% on a yearly basis to Rs 2451 crore for the quarter. 

However, there was relief in terms of L&T’s order intake, which increased by 32% on a yearly basis to Rs 27929 crore. For the full year, this was Rs 88035 crore against Rs 70574 crore in FY12, also surpassing its order intake guidance of Rs 81000 crore for FY13.

The board of directors of the company have approved a bonus issue of 1 share for every 2 shares held. At a CMP of Rs 1517, the stock discounts its consolidated FY13E EPS of Rs 83 by 18.2x. Investors with a long-term horizon can take this dip in share prices as an opportunity to enter the counter.