L&T Q3 net seen up 1%, hydrocarbon biz may post loss: Poll

Overall analysts feel the third quarter performance may be by & large muted. Continuation of execution challenges and potential of further losses at its hydrocarbons subsidiary are the key reasons for this subdued growth.

Revenue growth momentum may sustain (ex-hydrocarbon business) driven by pick up in execution at domestic projects and strong order book position of the company. On the other hand, the street is concerned about the extent of execution pick up in Q3, as April-September period has been weak and the guidance range was changed to 10-15 percent against 15 percent consolidated revenue growth. Order intake remains the major concern, feel analysts. Order intake announcements have been significantly muted at Rs 10,000 crore in Q3FY15 against average of Rs 19,500 crore in the last 4 quarter. Guidance at the consolidated level was expectations of 20 percent order inflow growth.

Domestic order project wins have been aided by large railway orders from Western DFCC of Rs 2,600 crore Overseas wins have been muted, particularly impacted by the sharp decline in crude prices, and fall (of 30 percent Y-o-Y) in 3-month moving average order award in Middle East. Analysts expect order inflows at Rs 20,000 crore and upwards. After looking at the extent of write offs in the Hydrocarbon business in April-September period, most analysts expect continued losses at L&T’s Hydrocarbon subsidiary with potentially more provisioning to be booked in Q3 or Q4. What to watch out for:-Commentary on the Middle East orders given the recent fall in crude prices-Any change in guidance-Net working capital had deteriorated to 25 percent of revenue in Q2FY15 (against 18.2 percent Y-o-Y) and remains at high levels, given the tight liquidity conditions-Order intake