Quarterly results preview: L&T likely to report more of order inflow

The quarter's revenue is expected to gain from a low base, as goods and services tax implementation led to lower revenue recognition in the same quarter a year before

Engineering conglomerate Larsen & Toubro (L&T) is expected to report a continuing momentum in new orders for the September quarter. It is to announce its quarterly financial results on Wednesday.

Analysts expect order inflow and working capital to be key issues in the management discussion.

In a Bloomberg poll, 12 of them estimated a consolidated net profit of Rs 17 billion and 13 estimated revenue at Rs 292 billion for the quarter. In July-September 2017, the consolidated net profit was Rs 18.2 billion and revenue Rs 264 billion. The profit figure had exceptional items, including divestment of a subsidiary. Without these, it was Rs 16.8 billion.

“Consolidated sales are likely to grow 12 per cent, led by a pick-up in the hydrocarbon and domestic infrastructure segments. We expect consolidated Ebitda (earnings before interest, taxes, depreciation and amortisation) margins at 10.5 per cent, against 9.8 per cent (in the comparative quarter), led by an uptick in infrastructure, heavy engineering and financial services’ margins,” analysts with Bank of America Merrill Lynch wrote in an October 9 note.

The quarter’s revenue is also expected to gain from a low base, as goods and services tax implementation led to lower revenue recognition in the same quarter a year before.

At the start of the financial year, L&T said it expected 10-12 per cent growth in order inflow, year on year. Also, 12-15 per cent growth in revenue and a stable (with an upward bias) one of 25 basis points for expected margins. For the April-June period, growth was 37 per cent over a year, with Rs 361 billion of new orders.

Analysts at JP Morgan expect the order inflow growth to be higher, at Rs 430 billion or 50 per cent. “Led by significant order wins across urban infra, airports, water and hydrocarbons. So far, the script is unfolding as expected • a strong first half leaves a buffer to absorb a decline in inflows in the second half, in the run up to May 19 general elections, as cautioned by the management,” they wrote in a report dated October 9. The company secured orders worth Rs 287.3 billion in the same quarter a year before.