L&T results preview: Q4 income estimated at Rs 30 bn, EBTIDA margins to dip

Larsen & Toubro
Engineering conglomerate Larsen & Toubro (L&T) is expected to report an overall good March quarter, both on execution and order inflow. The Street will look for management guidance on both fresh orders and execution.

L&T will announce the results, for the March quarter and the full financial year of 2017-18, on Monday. 
In a Bloomberg poll, 11 analysts estimated a net income of Rs 29.9 billion for the quarter and 13 estimated consolidated revenue at Rs 410.7 billion.

In November, L&T revised its order inflow growth forecast from the earlier 12 per cent to 14 per cent range for the financial year to flattish, owing to weak inflow in the first two quarters. Analysts feel this is likely to be beaten. 

“L&T should meet its flat order inflow guidance at flat to five per cent growth; they might have delivered 8 per cent. We expect double-digit growth in execution, due to improvement in the infrastructure and hydrocarbon segments,” said Renu Baid, analyst with IIFL.

As of end-December, L&T’s nine-month order inflow for FY18 Rs 1.03 trillion and the total order book at Rs 2.7 trillion.

“The company is expected to beat its revised order inflow guidance, as it saw a large number of order wins in the final two quarters of FY18,” said an analyst from a domestic brokerage, who did not wish to be identified. Significant order wins in the past six to eight months included two packages of the Mumbai Trans Harbour link, for Rs 86.5 billion.

On margins, it is expected to report a dip on a year-on-year basis. “Ebitda (earnings before interest, tax, depreciation and amortisation) margins might be weak compared to last year, as there was chunkier infrastructure order execution last year, compared to the low margin hydrocarbon and heavy engineering order execution this year. Overall results for L&T are expected to be good, with most headwinds behind. Proceeds from the electrical and automation (E&A) business sale were also yet to reflect in their numbers,” said Baid from IIFL. Earlier this month, L&T signed a definitive agreement with Schneider to sell its E&A business for Rs 140 billion.

In the management interaction on Monday, the Street is expected to watch for guidance on order inflow growth for the current financial year and if there are further signs of improved execution for domestic orders. Baid from IIFL expects the company to forecast a 12 to 15 per cent in revenue and a 5 per cent to 10 per cent growth in order inflow for FY19. “In case, the company chooses to be conservative, given it is an election year, order inflow growth guidance might be between flat and five per cent,” she said.

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