Larsen & Toubro Announces Q2FY14 Results

The infrastructure sector has been witnessing difficult scenario since past few quarters. And the September 2013 quarter is not any different if the L& T results are anything to go by. The company announced it September 2013 quarter where its topline stood at Rs 14510 crore as against Rs 13195 crore in September 2012 quarter. However the bottomline took a beating and the profit after tax stood at 977.50 crore against Rs 1137 crore posted in September 2012 quarter. However the noticeable factor is for the September 2012 quarter included Rs 214.29 crore. Else the profitability would have been marginally higher.

The EBITDA margins for the quarter stood at 9.7% as against 10.60% in September 2012. But one should understand that the quarterly margins of the company should not be indicative of yearly performance of the company. The margins are dependent on the completion of projects and hence the quarterly margins may vary from quarter to quarter.

Another factor is, order book of the company has witnessed a good traction in the Q2FY14. Here the order book increased by 11 per cent to touch the levels of Rs 176036 crore as against Rs 158528 crore in September 2012. The order flow has also been good as for the quarter new order intake was Rs 26533 crore as against Rs 20967 crore in September 2012. This was an increase of 27 %. On the order book front 15 % is international and 85 % is domestic. In terms of order inflow around 29 % is international and 71 % is domestic. Infrastructure segment was the performer for the quarter while the performance of other segments like hydrocarbon, power and heavy engineering remained muted.

As regards the outlook, the management has stated that the macroeconomic environment continues to remain weak and uncertain on account of the twin deficits, tight liquidity, persistent inflation and heightened volatility in the financial markets. Investment climate in the economy is yet to show signs of recovery. Deferral of new projects and delayed decision making and execution features the weak performance of the core sector.

We are of the opinion that though the financial performance of the company has not been good the order book scenario is improving and this is good sign. But in the near term there would be some pressure on the scrip on the bourses. However the decline in the counter should be taken as an opportunity to accumulate the counter.