L&T Q3 PAT seen up 6% at Rs 895 cr

Larsen and Toubro (L&T), an engineering and construction company, is expected to report a profit after tax of Rs 895 crore in the third quarter of FY12, a growth of 6% as compared to Rs 840 crore in the corresponding quarter of last fiscal.

Total income is seen going up by 16% to Rs 13,233 crore from Rs 11,413 crore year-on-year.

EBITDA is likely to go up by 15% to Rs 1,421 crore in the quarter ended December FY12 versus Rs 1,238 crore in a year ago quarter.

Operating profit margin is expected to be at 10.74% versus 10.85% during the same period.
 
Expectations

-Expect top line growth on the back of good execution of large order backlog

-EBITDA margins may be impacted due to commodity price hikes, increased competition, and inflationary environment for project execution

-Do not expect INR depreciation to have major impact on margins since company makes decent revenues from its international operations
* Company has some foreign currency loans

Key factor to watch for -

Management commentary on the sector outlook and how things might pan out in terms of margins going forward

Management comments on order inflow outlook along with FY13E guidance and risk to order execution will be key monitorable

Company announced new orders worth Rs 8,359 crore during Q3

Management cut its order inflow guidance for FY12 to 5% from 15-20% earlier
-Implied order inflows for H2 as per the new guidance is Rs.51500cr
-Management expects order accretion in roads, hydrocarbons, process segments

Margin Guidance for FY12
-Management revised margin shrinkage guidance for FY12 to 75-150bps from 50-75bps earlier
-Competitive intensity and higher than estimated costs leading to increased margin pressure