Result Analysis : Larsen & Toubro Ltd Q2FY21

Result Analysis :  Larsen & Toubro Ltd Q2FY21

Larsen & Toubro Ltd.’s quarterly profit and revenue fell, and order inflows slowed, even as the nation eased the lock down curbs.

Net profit before exceptional item fell 41.8% year-on-year to Rs 1,462.84 crore in the quarter ended September, India’s largest engineering-to-construction company said in an exchange filing. That compares with the Rs 1,234.9-crore consensus estimate of analysts. 

Including exceptional item, the loss stands at Rs 2,322.10 crore.

L&T, in the reported quarter, posted an exceptional cost of Rs 3,732.30 crore, comprising impairment of funded exposure in the heavy forgings facility joint venture and impairment of assets in the power development business. 

 

L&T completed the sale of its electrical and automation unit to Schneider Electric during the July-September period. It also announced a *special dividend of Rs 18 apiece*

Revenue fell 12.2% over the year ago to Rs 31,034 crore

Operating profit fell 12% to Rs 5,318.77 crore Margin stood at 17.1%

The year-on-year numbers aren’t strictly comparable as last year’s figures don’t include Mindtree Ltd.’s results, which L&T acquired, and the switchgear business.

Order Book L&T’s order book inflow during the quarter stood at Rs 28,039 crore — a decline of 42% over the corresponding quarter a year ago.

International order during the quarter constituted 36% of the total order inflow. The consolidated order book of the group stood at Rs 2,98,856 crore as on Sept. 30, 2020.

L&T, which has stopped providing guidance for order inflow, said it's "seeing tremendous uncertainty in the current environment".

"We are still discovering what the new normal could be post Covid," said R Shanker Raman, chief financial officer at L&T during the press interaction.

"We are not a committing to a guidance this year." The company, however, received a letter of intent for high speed rail project or bullet train valued at Rs 25,000 crore. The project will be completed in four years, adding to order inflow in the third quarter.

Segment wise performance

Revenue YoY
Infrastructure 13,096 Cr (20%)
Hydrocarbon 4,050 Cr (6%)
IT & tech 6,200 Cr 5%
Financial 3,342 Cr (3%)
 

Outlook on Capital Spends

A strong emphasis by the government on infrastructure spending augurs well for the company, and the National Infrastructure Pipeline, which lays out a detailed capex road map till 2025, provides visibility on the domestic infrastructure outlook.

Sectors such as water, power transmission and distribution, metro/regional rapid transit system, railways, roads and expressways are witnessing increased traction as far as bidding / tendering activity is concerned.

 

View: It is a very good company for investment at current levels i.e in range of 890 to 950 with a long term target of 1300 . 

Sources: Various publications

Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.

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