L&T likely to meet revised order guidance for FY18

Larsen & Toubro (L&T) reported a slew of new orders in the December quarter, which analysts expect will help the engineering conglomerate match the current financial year’s order intake with that of the previous year. The company might also positively surprise with a higher growth rate in order intake, if the expected defence orders fructify.
 
L&T, in November, revised its order inflow growth guidance for the current financial year to ‘muted’ from the earlier stated 12 per cent. “We expect the company will meet the revised guidance, with some upside. However, if the defence orders come in, there can be a surprise,” said a senior analyst with a domestic brokerage firm.

 
For the financial year 2016-17, L&T reported an order inflow of Rs 1,430 billion, witnessing a growth rate of 5 per cent on a year-on-year basis. In the first three quarters of 2017-18, L&T has announced orders worth Rs 659.21 billion, compared to Rs 524.33-billion orders reported in the same period last year.

Key Takeaways

• In November, L&T revised its order inflow growth guidance for the current fiscal year to ‘muted’ from the earlier stated 12 per cent
• For FY17, L&T reported an order inflow of Rs 1,430 billion, witnessing a growth rate of 5 per cent on a year-on-year basis

“Rs 1,430 billion is not a small number, so the company needs to meet a huge base in comparison to what it saw last year. The company has seen some significant orders in the December quarter, but we are still talking about a huge base. The company is likely to meet the revised guidance of flat growth, nothing more, given where the current environment is. The power sector continues to remain weak and the company has not been looking at big NHAI orders,” said another analyst, who did not wish to be identified.

 
In the December quarter alone, L&T reported Rs 315.03 billion worth of orders, including some significant orders like the Rs 86.50-billion Transharbour link package 1 and package 3 projects. “The lumpiness in the orders could deviate the growth number anywhere between 0 per cent and 85 per cent. In a base case, the company can at least match the numbers reported in the previous financial year. Yet a word of caution: Orders are prone to proverbial systemic delays and that has been the case for sometime now. Take defence orders, for instance. A call on swifter translation of orders, in terms of executive decision, is anybody’s guess,” said Rohit Natarajan, analyst-institutional equities, IDBI Capital Markets. In the beginning of the current financial year, Jayant Patil, head of defence and aerospace, and member of heavy engineering board, L&T, had told Business Standard, “A lot of action towards awarding contracts on domestic private sector defence companies is expected this year, with a large number of contracts actually getting into the concluding stage. Six or seven large programmes between Rs 5 billion and Rs 150 billion range are expected to get placed with Indian companies to kick off Make in India in Defence.” However, not much of this has fructified so far.