L&T's fresh order inflow number encouraging: Morningstar

Menaka: Quarter gone by looks fairly dismal but the fresh order inflow numbers look very encouraging at Rs 35,000 crore?

A: Absolutely as you are seeing. There are two things which we are clearly seeing here. Number one, that, again as compared to the last quarter we are again seeing the order pickup showing good signs. Now, we just have to see whether the green shoot in the domestic side is continuing in this quarter also but apart from the order, the numbers actually continue to show pressure on the margins and the P&L is slightly below, so net profit is below our expectation but the orders which are coming they are absolutely upbeat.

Menaka: Have you been able to pick up ant details on the mix in terms of the order inflow, the fresh order inflow, domestic, international vertical wise all of that?

A: No, I am just going through the statements.

Pragya: On the topline what do you think has led to this big miss because you while on the order inflow number there results have definitely been a fair bit of positive surprise what led to this big topline miss? Would it lead you guys to revise your guidance downwards or estimates for FY15 and FY16?

A: Our estimates are already on the lower end of the consensus because what we believe is that dollar has just started to pick up. On the international side the competitive situation is quite clear so the margins are not that supportive. On the domestic side basically the capex has not picked up so while orders have just started to pick up it will take a couple of quarters for the company to show that in the profit and loss (P&L).

So whatever improvements we have seen our last quarter like largely came from some disposals and some pick up in the infrastructure segment. So for us it is affirming our thesis that the margin should be range bound and any large improvement is unlikely. What is good to see here is that the order book is continuing to maintain the pace.

Senthil: How much of these orders that they have reported today could be orders that they would have normally reported in the fourth quarter but they have booked in the third quarter this year?

A: I don't think, like, should not be more than 30 percent because largely if you want to compare, fourth quarter basically will bring the impact of higher execution. Normally the execution pace picks up in the fourth quarter. So, that should eventually happen. Normally happens every time every year.

Pragya: On a consolidated basis the nine month order inflow number of the company stands at Rs one lakh eight thousand crore or so, so the asking rate for them to actually achieve the 20 percent order inflow guidance for quarter IV would roughly stand at any where between Rs 45,000 crore plus. Do you think the company is in a position given all the kind of management commentary you have heard until now that they will be able to achieve that because that is a tall ask we haven’t seen Rs 45,000 crore plus kind of orders booked by the company in quite sometime now?

A: It will be very tough and we do not have a very clear idea whether the international bid will eventually result in a order awarding at present but it will be very tough and also if you look at the consolidated profit after tax which has come roughly around Rs 8 -7 crore it is absolutely below the street estimate and below our estimate also.