Jan 24, 2013, 09.28 PM | Source: CNBC-TV18
"Considering L&T’s E&C business, their machine industrial product division has performed very well," said SP Tulsian of sptulsian.com in an interview to CNBC-TV18.
SP Tulsian (more)
CEO, sptulsian.com | Capital Expertise: Equity - Fundamental ,IPO
Tulsian is disappointed on the margin front but the road ahead seems to be good for the company. "L&T always sees robust numbers in Q4. Little disappointment on their margin, but overall the future seems to be good and intact," added Tulsian.
Below is an edited transcript of Tulsian's interview on CNBC-TV18
Q: First a word on Larsen and Toubro (L&T) and what you made of the numbers?
A: The entire focus has shifted on the order inflow which is quite satisfactory. However, if you take a call on the Rs 19500 crore order, you need to subtract Rs 4000-4500 crore. I have not been able to understand the commentary of the management saying that order inflow can easily come in the road sector. Does it mean that if the cancellations will happen then only they will hunt for the orders? This is a bit confusing and maybe net basis should be taken as Rs 15000 order inflow only.
If I go by their E&C business, their machine industrial product division has performed very well. The EBIT has doubled over sequentially and that has made the EBITDA margin to move to about 9.6 percent. So, there are concerns and disappointment on the E&C business which is their core business contributing 90 percent to their topline where we have seen a fall of about 160 basis point sequentially. So, that is a cause of concern.
In case of few companies, we take a narrow focus, here in case of the order inflow, I am not saying that order inflow is not the basic criteria, that is very important but we need to see that link with the margin also. L&T has always been able to hold the margins in double digit in their E&C business because their electrical business has been contributing very low, machine and industrial product division has been contributing very low.
Electrical division is contributing less than Rs 1000 crore on a QoQ basis and machinery industrial product less than Rs 600 crore. I am disappointed on the margin front but the road ahead seems to be good for the company and Q4 always sees robust numbers coming in from the company. Overall, little disappointment on their margin but overall the future seems to be good and intact.
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