Larsen & Toubro gains 6% as Q2 profit beats estimate

The stock was up 6% to Rs 1,379 on the BSE in early morning trade after the company reported 23% Y-o-Y jumped in its consolidated net profit at Rs 22.30 billion in September quarter.

Shares of Larsen & Toubro ((L&T) were up by 6% at Rs 1,379 per share on the BSE in early morning trade after the company reported 23% year-on-year (Y-o-Y) jump in its consolidated net profit at Rs 22.30 billion in September quarter (Q2FY19). The consolidated gross revenue during the quarter grew 21% at Rs 320.81 billion on a Y-o-Y basis.

Analysts on an average had expected a profit of Rs 17.35 billion and revenue of Rs 297 billion for the quarter. The consolidated earnings before interest, taxation, depreciation and ammortisation (Ebitda) at Rs 38 billion, up 27% Y-o-Y, was ahead of analysts’ estimates of Rs 33.5 billion.

L&T said the growth during the quarter was facilitated with improved execution in project businesses, strong growth in service businesses and recognition of revenue on completed performances in the realty business.

The company has witnessed a strong growth of 46%, with order wins worth Rs 419.21 billion at the group level during the quarter ended September 30, 2018, due to pick-up in domestic ordering activity. International orders at Rs 82.68 billion constituted 20% of the total order inflow, it added.

L&T's order book stood at Rs 2.81 trillion, as of September 30, of which, the international order book constituted 22%.

Government's thrust to infrastructure development, rural electrification, water supply and irrigation has provided investment momentum to the domestic markets for the past few quarters. Besides allocation of funds for projects, a push by Government has also been seen in facilitating faster clearances to ensure speedy, timely execution of the projects. Recovery of stressed corporate debts through insolvency resolution has alleviated the concerns on liquidation of funds blocked in stressed assets and also improved the business sentiment, it added.

JP Morgan has ‘overweight’ rating on the stock with 12 month target price of Rs 1,570 per share. The brokerage firm believes the strong near-term order inflow performance, better-than-expected order/revenue growth guidance, management focus on RoE improvement afford a good entry point into the stock. From a two-year investment horizon it believes that L&T offers a focus on a potential recovery in the private investment cycle too.

At 09:30 am; L&T was trading at Rs 1,374, up 5.8% on the BSE, as compared to 0.05% rise in the S&P BSE Sensex. A combined 2.64 million equity shares changed hands on the counter on the BSE and NSE.