L&T

There is and has never been a paucity of orders for L&T. Yet, the current Q1FY14 performance for L&T shows that at the ground level, there is simply no execution. Companies are cancelling their big projects and there is really no new facility coming up. So in the challenging atmosphere, it comes as no surprise to see that the company has missed its estimates. This is India’s biggest construction and equipment company and if this is its state, clearly the capital goods sector and the economy is in a lot of pain. As against expectations of Rs.900 to 950 crore net profit, it posted a much lower net profit at Rs.756 crore v/s Rs.864 crore in Q1FY13. The rise in net sales was also very muted at Rs.12,555 crore, up 5% (Yoy). The company has stated that net profit was impacted due to job mix, lower margin accruals and lower other income.  The market disappointed, pummeled the stock down to Rs.900 levels and in the coming days, it is expected to hit some new lows at around Rs.870 levels.

In terms of segmental performance, the worst performance was from its power segment – its EBIT was down 44%. On the other hand, its infrastructure segment showed a robust 23% jump in EBIT and that in hydrocarbon segment was up 44%. Metallurgical was down 0.7%, Heavy engineering was down 28% while electrical and automation rose 75%. Machinery and industrial products fell 7%. Thus across the board, there was more of a decline than rise. As mentioned earlier, order book remains robust. It reported, for the quarter, a 28% increase in order inflows at Rs 25159 crore and of this 53% orders were from private sector and 35% from public sector. Its order book as on June 30 stood at Rs 1.65 lakh crore.

The company remains optimistic about the future. At the end of FY13, the company had guided a 15-16% rise in FY14 revenue and EBIDTA was expected to be maintained at FY13 levels at 11.5% and despite the poor Q1 numbers, it remains adamant and sticks to this guidance.