All eyes on order book in L&T results: Kotak

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All eyes on order book in L&T results: Kotak

Sanjeev Zarbade of Kotak Securities spoke to CNBC-TV18 about his expectations of the L&T numbers and pointers to watch out for.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Larsen BSE | NSE 22/05/12 Are Mutual Funds betting on Larsen?

Sanjeev Zarbade of Kotak Securities spoke to CNBC-TV18 about his expectations of the L&T numbers and pointers to watch out for.

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: The stock has seen a bit of a bottoming out and fairly decent rise in the past few weeks. Which are the key numbers that you will watch out for?

A: So far our profit forecast for the company goes, we are expecting Rs 872 crore in bottomline; that is against Rs 805 crore in the Q3 of FY11 on an adjusted basis. The other thing that we would be watching out for would be definitely the margins apart from order intake and any signs of projects getting delayed because in such times, it so often happens that some projects are always running on a schedule which is behind, and hence it has its negative implications on the margins in the coming quarter. Apart from that, we would also get a sense of what kind of order pipeline the company has since that would give us an idea about what we can expect from the order intake in FY13.

Q: On the topline for L&T, this time around the company had guided for around 25% on the topline, any sort of negative surprises we could expect on that front?

A: Basically we are looking at topline of Rs 13,500 crore in Q3, that is close to 20% on year on year (YoY) basis. The company has the benefit of strong order backlog. But if one looks at the way the core sector data has come in the month of October and November; it was in the low single digits; it's very difficult to probably grow at 25% topline level. We would be more comfortable with 20% revenue growth in the current year at least.

Q: The big worry for the market has also been order book, last year they did Rs 80,000 crore in terms of fresh order inflows. This year in the first half they have only done Rs 32,300 crore. So would that be a big negative if order flow distinctly indicated that they may not even make it to Rs 80,000 crore?

A: Yes definitely the fear is there and to that extent, we have already seen the stock has underperformed over the last three-four months. We also had the Chairman AM Naik giving us guidance about what kind of order outlook he has. In our view we are looking at a number close to Rs 70,000- 71,000 crore which is clearly a decline over the previous year.

Q: But is that in the price. What is your price target?

A: We have a price target of Rs 1,500, we would be looking at the numbers that would be reported and the post management commentary based on which we would be looking at making any changes if necessary.

Q: The stock is sluggish before its numbers, any pre indications that you are getting or is it just profit booking because of the strong run that we have seen?

A: I think it's more of a profit-booking since the stock has returned more than 20-25% from its bottom. The number expectations are also not great and the markets would be sensing another possible downward revision in the overall guidance for the current year. Given all these factors, I believe the stock could be weak and profit booking is definitely another factor.