L&T's Q4 net profit way ahead of Street estimates

Engineering and construction company Larsen and Toubro (L&T) reported 69 per cent growth in net profit for the quarter ended March on the back of improved operational performance, higher sales and an exceptional income of Rs 484 crore from dilution of its stake in L&T Finance. Net profit on a standalone basis stood at Rs 2,723 crore in the fourth quarter against Rs 1,609 crore in the same period last year. Even after adjusting for one-time gains, the company has beaten analyst estimates by a long shot.

The company exceeded its 20 per cent new order growth forecast on a consolidated basis reporting 23 per cent increase in orders to Rs 1.26 lakh crore for FY14. On a stand-alone basis, the order growth was 15 per cent. The company said several large infrastructure orders bagged were in the nature of joint ventures and consortiums and were reported in consolidated numbers. On a stand-alone basis, orders grew to Rs 94,000 crore during the financial year. About 33 per cent of order wins in FY14 were from foreign markets and diversification of its business helped L&T to beat the downturn in the domestic market. For FY15, too, L&T has given a 20 per cent new order growth forecast and 15 per cent sales growth forecast. The order book has grown 13 per cent in FY14 to Rs 1.62 lakh crore, giving it revenue visibility for three years. The company has conveyed growth in order inflows is indicative of strong broad-based sectoral presence in a challenging environment.

In the fourth quarter, sales grew by 11 per cent year-on-year to Rs 20,079 crore and for the full year sales rose 10 per cent to Rs 56,598 crore. Like the order inflows, revenue growth would have been better, had it not been for clearance delays and "award decisions and managing project execution under difficult conditions." Executive chairman A M Naik said, "L&T's performance is better than expectation. We have grown our international business and we have been able to get over the storm.'' He added that long-delayed infrastructure projects should gain momentum with the change of government. He expects visibility in project tendering by August-September.

The company has not only managed to grow the order book in these difficult conditions but also improved its profitability. In the March quarter, operating margins have improved by 260 basis points year-on-year to 14.4 per cent, beating even the most optimistic analyst estimate. Operating margin for the full year was 11.8 per cent compared to 10.6 per cent it clocked in FY13.