L&T beats market forecasts, net jumps 22%

Larsen & Toubro (L&T) beat market expectations on Monday with a 22 per cent jump in third-quarter net profit, but cautioned the financial year could end on a flat note.

Despite a subdued economic environment, revenue rose 23 per cent, while order intake grew by 28 per cent. Net profit for the three months through December climbed to Rs 992 crore on the back of increased revenue and Rs 448 crore in other income, which included dividends from subsidiary companies and treasury gains. The order book, too, grew in size, with Rs 17,129 crore of new orders in the quarter. L&T shares closed 0.3 per cent higher at Rs 1,277.70 on the Bombay Stock Exchange.

Most orders came from the infrastructure, power distribution and transmission, and minerals and metals sectors, but there was no contract in power generation. Margins also came under pressure due to increased competition and rise in raw material costs. The company executed forward contracts for supplies to de-risk itself from exchange rate fluctuations, but the operating margin fell 1.2 per cent.

Equity analysts had expected the company to make profit in the range of Rs 870-880 crore. Profit rose despite a 23 per cent rise in operating costs and 30 per cent increase in salaries. The engineering and construction segment, which contributes 80 per cent to the total revenue, registered 25 per cent growth in revenue, with the bulk of orders from the infrastructure, power and hydrocarbon sectors. The electrical and electronic segment was a laggard, with a two per cent fall in operating margins.

While the third quarter was a period of high growth, the fourth one could be a different story altogether. “It is going to be tough. We need to be at our competitive best,” said R Shankar Raman, chief financial officer, adding the year could end on a flat note.

The company had earlier revised its order expectation to five per cent from 15 per cent, but now achieving that could also be uphill. L&T bagged orders worth Rs 50,000 crore in the first three quarters. It needs to secure another Rs 30,000 crore of orders to meet the target. It did not give a revised order guidance. Because of the economic slowdown, L&T saw projects worth Rs 15,000-20,000 crore getting deferred and all of these may not start this quarter.

Shankar Raman said a third of projects which L&T was pursuing had been deferred. Ten to 12 per cent of the secured orders are not moving ahead because of lack of clearances.