Engineering and construction major Larsen and Toubro (L&T) recorded better than estimated net profit of Rs 1,920 crore, up 31.6% (YoY). In an interview with CNBC-TV18, Sanjeev Zarbade of Kotak Securities analysed the Q4 results of L&T and said that the topline is almost in line with their expectations. However, he believes that the bottomline is much higher than what they had estimated.
Zarbade is of the view that the kind of guidance the company gives regarding its order intake in the current year will largely decide the course of the stock in FY13.
Below is the edited transcript of his interview with CNBC-TV18. Also watch the accompanying video.
Q: Have you had a chance to look at the numbers and what is your first comment?
A: The numbers at the bottomline level are much higher than expectations. We were expecting around Rs 1,600 crore, but the actual figure is around Rs 1,900 crore. But, at the topline level, it is almost in line with our expectations.
Q: The tax rate is lower and it's not operational, plus they have delivered an order inflow of just about Rs 70,000 crore. The stock is still holding up. I fail to understand how? Is the market factoring in all these negatives at this point, not surprised with what L&T has delivered?
A: In a very difficult quarter, the company has been at least able to execute its projects on time and revenue growth has been very much in line with expectations, in accordance with what the company had been largely guiding. But, with the way the project mix has changed and the cost structure has also remained elevated, to some extent the margin erosion was expected.
We are seeing the same thing happening. But, the kind of guidance the company gives for the current year, regarding its order intake, will decide the course of the stock in the coming quarters.
Q: What is the call right now? Would you give thumbs up to the results?
A: I would give thumbs up to the result mainly because the topline has been quite strong. The way the macroeconomic scenario is panning out, it's very difficult to get orders. But, at least in the execution side, the company has been able to deliver.