Larsen & Toubro : Strong Show Despite Gloomy Scenario

L&T which is the largest engineering company in India announced its December 2013 quarter results and the results have been in-line with the street estimates. However the results have been adjusted for the quarter as it transferred hydrocarbon business to its subsidiary L&T Hydrocarbon Engineering with effect from April 1, 2013. Accordingly, the company restated suitably its earnings for the previous quarter ended September 2013 and numbers relating to previous periods.

The numbers itself speak of its performance as for the December quarter it posted a topline Rs 14387.51 crore against Rs 12869.34 crore posted in December 2012. On the bottomline front, it posted a recurring PAT of Rs 1136 crore recording an increase of 12 % over the corresponding quarter last year. If we consider the exceptional gains on dilution of part stake in a subsidiary company, the overall PAT grew by 22 % during the quarter.

While the operational performance has been good, the company has witnessed good traction in its order book also. Order inflow for the quarter stood at Rs 21722 crore showing a growth of 21% on Y-o-Y basis. The total order book as on December 31st 2013 stood at Rs 171184 crore showing an increase of 13 % on Y-o-Y basis.

As we had mentioned in our earlier results analysis of L&T (September 2013 quarter), the company has been focusing on the international markets also. Hence while Rs 8237 crore of order inflow was from international markets, out of the total order book 15 % is from international markets.

On the segmental front, infrastructure segment was a star performer as the revenues as well the order book soared significantly. While the order inflow increased by 365 to Rs 18390 crore the order back log stood at Rs 130464 crore for the December 2013 quarter. The best part was improvement in the EBITDA margins to 11.40% from the levels of 10.30% in the corresponding quarter last year.

Power posted a poor performance as the revenues declined by 30% on Y-o-Y basis to Rs 1212 crore. Even the order backlog declined significantly by 14% to Rs 15030 crore. Metallurgy division witnessed stagnant sales and here also the order book witnessed a decline of more than 30% to Rs 14084 crore. The EBITDA margins stood at 16.10% against the 17.60% in previous year.

As regards the results we are of the opinion that, despite the gloomy scenario the results have been good. Consistent order inflow is a major positive factor. We expect the sector to witness revival in coming quarters. We already have a buy recommendation on the counter and would stick to our call even after results.