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Larsen & Toubro Q4 Preview | Net profit likely to grow 21%; revenue 12-14% on construction business

The growth is aided by improved order flows and growth in EPC and construction businesses.

May 12, 2022 / 06:55 AM IST
 
 
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Larsen & Toubro Ltd, India’s largest infrastructure company, is expected to report a 21 percent year-on-year rise in its consolidated profit for the quarter ended March 2022. The company will declare its results today.

The revenues for the top EPC (engineering, procurement and commissioning) company are expected to jump 13 percent over the year-ago quarter driven by improvement in its core EPC revenues.

Experts expect the company to register a consolidated profit after tax (PAT) of Rs 4,100–4,200 crore, while the revenues are expected to come in at Rs 54,000–54,900 crore.

L&T had recorded a consolidated PAT of Rs 3,293 crore for the corresponding quarter last year when it had achieved consolidated revenues of Rs 48,088 crore.

The consolidated profits for the quarter ended December 2021 stood at Rs 2,055 crore, when the company had clocked revenues of Rs 39,563 crore.

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Experts expect a mid-teens growth in the overall order inflows to the tune of Rs 70,000–75,000 crore.

According to a report from Kotak Institutional Equities, L&T is expected to report consolidated revenues of Rs 54,970 crore with an on-year growth of 14 percent. On a sequential basis, the revenues are seen surging by 39 percent.

“We expect 13 percent YoY improvement in core EPC revenues as we bake in improved construction activity during the quarter,” a report from Kotak Institutional Equities said. Order inflow for the fourth quarter is below the brokerage’s expectations, based on announced order inflows. It expects the recovery in order inflows to gain momentum in coming quarters.

Brokerage firm Motilal Oswal expects the overall order inflow at Rs 69,000 crore, while consolidated revenues are expected to rise 12.2 percent on-year to Rs 54,000 crore.

Motilal Oswal forecasts the company’s EBITDA (earnings before interest, tax, depreciation and amortization) to grow by 9.3 percent on-year to Rs 6,980 crore, compared to Rs 63,900 crore registered a  year back. EBITDA during the quarter ended December 2021 stood at Rs 45,300 crore.

Kotak Institutional Equities, however, is more optimistic about L&T’s performance for the quarter as it expects the EBITDA to improve 19.4 percent on-year to Rs 7,630 crore. On a sequential basis, it sees the EBITDA surging by 68.4 percent.

Kotak works out the EBITDA margins for the quarter at 13.9 percent, improving by 60 bps on year and by 242 bps on quarter.

“We expect core E&C business EBITDA margin at 12.7 percent, down by 30 bps YoY but the company has sufficient levers available to set off the impact of higher commodity prices on the current order book”, a report from Kotak Institutional Equities said.

Motilal Oswal, on the other hand, sees a 40-bps on-year decline in EBITDA margins at 12.9 perccent compared to 13.3 percent during the same period a year ago. Sequentially this is an increase of 140 bps.

According to experts, the key monitorables would be demand outlook across various segments and order prospects in FY23 while commentary on working capital management and commodity cost impact would also be important.

The L&T stock ended Rs 37.15, or 2.31 percent, down at Rs 1,570.80 on May 11 at the National Stock Exchange. The stock has gained 13.5 percent during the past one year but is trading lower by 11.8 percent during the past one month.

Disclaimer: The views and investment tips of investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.



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Gaurav Sharma
first published: May 12, 2022 06:55 am
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