Engineering and construction major Larsen and Toubro (L&T) is expected to report a 12.2 percent growth in standalone profit after tax at Rs 970 crore for July-September quarter supported by higher revenues and operational income, according to the average of estimates of analysts polled by CNBC-TV18. Profit in the year-ago period was Rs 865 crore. Results will be announced today.
Net sales are seen going up by 10.9 percent to Rs 13,653 crore in the quarter ended September 2014 compared to Rs 12,308 crore in same quarter last year driven by the infrastructure segment.
Despite strong order backlog, analysts expect a modest topline growth as execution will take time to pickup and several large orders won in the past 3-4 quarters have not yet started to contribute meaningfully.
Operating profit (earnings before interest, tax, depreciation and amortisation) may jump 19.1 percent on yearly basis to Rs 1,413 crore and margin may expand 70 basis points to 10.3 percent in the quarter gone by.
The margin expansion may be helped by lower losses from shipbuilding segment, higher revenues from infra and realty segment.
Analysts expect higher finance costs (due to increase in debt) and higher effective tax rate – which will restrain profit growth.
On consolidated basis, they expect hydrocarbons, forgings and shipyard segments to report losses which may impact the consolidated numbers.
Order inflows and order book
L&T has announced orders worth Rs 21,500 crore in Q2FY15 as against Rs 22,300 crore in previous quarter.
Analysts expect order inflows worth Rs 30,000 crore in September quarter.
Key developments to focus on in Q2
There was a fund infusion by Canada Pension Fund in L&T IDPL (Rs 1,000 crore) and stake sale in Dhamra Port (to Adani Ports) where company has seen capital gains of Rs 1,350 crore that have eased funding support required from L&T towards development projects.
L&T acquired 50 percent stake in L&T Ramboll Consulting Engineers from Ramboll Denmark AS to strengthen its design base in the infra segment.
Key issues to watch out for
Hydrocarbons: Execution pick up (given project specific issues) and provisions (Q1FY15 EBITDA loss at Rs 890 crore) are key trends to watch out for
Analysts expect Q2 E&C execution to be higher by 5-6 percent YoY. E&C execution in Q1FY15 was down 8.6 percent Y-o-Y.
Net working capital, which had deteriorated to 23 percent of revenues in Q1FY15 (versus 17.3 percent Y-o-Y)
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