Engineering and construction major Larsen & Toubro is expected to see marginal fall in March quarter consolidated profit despite lower tax cost, as it could be hit by more than a week of nationwide lockdown in the end oof the quarter.
Most of segments barring hydrocarbon and services businesses may report a decline in growth in quarter ended March 2020, hence the revenue may see a moderate increase (5-7 percent) on year-on-year basis.
"Adjusted revenue growth will be 5 percent YoY mainly led by the services business. The country wide lockdown from March 23 may impact the revenue growth as the bulk of the bills got certified towards the March-end. Inclusion of Midtree revenue will boost the revenue growth in IT business," said Narnolia which sees 7 percent fall in profit YoY.
The brokerage feels revenue growth in other business like hydrocarbon will be around 12 percent on back of strong order book, power business will continue to report negative growth (down 31 percent) as the new orders received in last couple of quarter will take time to reflect into revenue.
While expecting 7 percent growth in revenue, Kotak Institutional Equities said, "Consolidation of Mindtree obviates YoY comparison. We expect a 5 percent YoY decline in core EPC revenues in Q4FY20 for continuing operations driven by ten days of negligible revenues. Most segment would report a YoY decline in revenues barring Hydrocarbon segment."
Brokerages expect double digit decline in March quarter order inflow due to lockdown.
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"The current ongoing lockdown will impact the company's business in materially in Q1FY21," said Narnolia which sees order inflow at Rs 33,000-35,000 crore from core E&C business in Q4FY20, while Motilal Oswal expects order inflows in the core business to decline 13 percent YoY.
Key things to watch out for would be working capital, impact of the COVID-19 on company's business, the execution trend and outlook on some big ticket size orders, outlook on FY21 and commentary on risk management amid lockdown.
The stock lost 41 percent during last one year due to fear of slowing order inflow and nationwide lockdown due to COVID-19 crisis. It was down 28 percent year-to-date and 38 percent during March quarter itself.
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