L&T results as expected as order-mix problems loom: Kotak

Sanjeev Zarbade, analyst, Kotak Securities explains to CNBC-TV18 that L&T's results are in line with expectations though problems threaten to affect the flow of orders and the constitution of the order-mix. 

Below is an edited transcript of the analysis on CNBC-TV18. Q: What are your first thoughts on L&T's results?
A: The L&T results are in line with both topline as well as bottomline expectations. We were expecting a profit of around Rs 919 crore and the actual adjusted profit is around Rs 907 crore. So the results are largely in line with expectations. We are a bit surprised on the EBITDA margins as the announced EBITDA margin of around 10.7 percent is better than expectations. Q: Is the order inflow of about Rs 20,900 crore better than expectations?
A: L&T would need around Rs 21,000-22,000 crore on a quarterly basis to meet the upper end of the guidance which is around Rs 84,000 crore for FY13 and the orders that have been announced in the quarter are a bit higher than what was expected – we were expecting around Rs 19,500-20,000 crore because the company had already announced orders worth around Rs 14,500 crore in the quarter. Q: Would you now raise your price target?
A: We will look at different factors in terms of outlook because there are clearly headwinds if you look at the order mix. A significant proportion of orders have come from infrastructure and even within that sector, the urban segment has contributed a very sizeable proportion.
The flow of captive orders, which typically accounted for around 15 percent of order intake till previous year, has stalled as the company is now reluctant to commit further capital to infrastructure development. Add to this, the weak industrial capex cycle still continues.
So we will have to take a call on these factors and then probably decide our outlook. But our main concern apart from this was on the EBITDA margin wherein the company has done quite commendably.