Why are analysts betting on L&T despite poor Q3 nos?

Bank of America Merrill Lynch has a buy rating on the stock, suggesting to accumulate on dips. However, it expects L&T to register a 10 percent Y-o-Y decline in its Q4FY15 recurring PAT but says weak profits of Q4 will most likely be ignored by the street given potential of its robust guidance for FY16.

February 11, 2015 / 09:32 IST

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Analysts are still bullish on Larsen & Toubro despite its tepid December quarter results and lowering order book guidance. Its net profit fell 14.6 percent year-on-year to Rs 1,060 crore on standalone basis, dented by lower operating income, higher depreciation and interest costs. However, the profit was supported by other income of Rs 621.9 crore (up 43.7 percent Y-o-Y).

Bank of America Merrill Lynch has a buy rating on the stock, suggesting to accumulate on dips. However, it expects L&T to register a 10 percent Y-o-Y decline in its Q4FY15 recurring PAT but says weak profits of Q4 will most likely be ignored by the street given potential of its robust guidance for FY16.

In a post result press conference, company’s CFO R Shankar Raman said that L&T will maintain 10-15 percent revenue (consolidated) growth band for this year.

Citi also has a buy rating with lowered target price of Rs 1770 from Rs 1849 per share. The brokerage though says that recurring standalone PAT miss of 13 percent is deceptively high due to higher depreciation. According to the brokerage, a yearly growth of 15 percent successively in two quarters in are high margin orders and Q4 and FY16e inflow prospects look robust. However it adds that lower oil prices will likely dampen future hydrocarbon prospects.