Forex gain likely to lift L&T's Q1 PAT by 15%: Poll

Heavy engineering and construction major Larsen & Toubro is expected to report an around 15 percent year-on-year jump in its June quarter profit to Rs 991 crore, boosted by an extra-ordinary income arising from forex gains.

Sales are also estimated to grow slightly over 14 percent to Rs 13643 crore, states a CNBC-TV18 poll.

Have a look at factors that will influence L&T’s Q1 earnings

Company’s revenue growth has been declining QoQ since Q2FY13. Amid a slowdown due to general elections across states, timely project execution will be closely tracked.

Government orders may decline around 40 percent from the firm’s order book

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Most order inflows are from international market and the firm has already announced Rs 20,000 crore orders in Q1.

The firm is learnt to be in the fray for Rs 8,000 crore of defence contracts which will be awarded in the next few months.

EBITDA percentage is expected to barely touch double digits due to large contribution from infra segment and also international orders for which margins are almost 200-300 bps lower than domestic orders.

Margins will also be under pressure as the company has encountered cost escalation in executing overseas contracts due to the rupee depreciation.

Increasing share of international orders is expected to result in substantial forex gains.

Key issues to watch out for

Mix of orders which the company reports is becoming increasingly important to understand margin picture.

Reiteration of guidance on order inflows and margins will be keenly tracked

L&T  has disappointed 8/10 times in the last 10 yrs on margins

Management comment on quality of order book also awaited

The firm may not revise earlier guidance of 20 percent growth in order flow and 15 percent jump in revenue booking.

As big ticket orders are hard to come by, will the company compromise on pricing and, correspondingly, margins – to achieve this?

Stockwatch

The company stock has climbed over 3 percent in past one year to Rs 968. Though the company has announced sizeable order wins during the quarter gone by, the street is concerned on execution and margin front, wherein there is scope of negative surprises.