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L&T Q4 preview: Analysts see muted nos amid Covid-19; order inflow eyed

For the quarter ended December 2019, L&T’s total order inflow stood at Rs 41,579 crore
Engineering and construction conglomerate, Larsen & Toubro (L&T), is expected to report muted numbers for the quarter ended March 2020 due to project delays and a slowdown in execution owing to Covid-19 lockdown, analysts say.

Usually, Q4 is an execution-heavy quarter for capital goods players, but the lockdown has affected execution and deliveries for most companies. However, being a diversified entity, L&T is expected to fare better than others.

The company is slated to announce its Q4FY20 results on June 5, Friday. That said, L&T's consolidated numbers are not strictly comparable on YoY basis due to the consolidation of Mindtree and sale of its Electrical and Automation (E&A) business to Schneider.

For the quarter ended December 2019, L&T’s total order inflow stood at Rs 41,579 crore, and the company’s outstanding order book was Rs 3.06 trillion. In January, the company maintained its full-year guidance of 10-12 per cent growth in order inflow for the full year. The guidance back then did not reflect the disruptions caused by the coronavirus disease (Covid-19) and the subsequent nationwide lockdown in March. READ MORE

Here's a look at what leading brokerages expect from L&T's March quarter results.

ICICI Securities

Lockdown on account of Covid-19, crude oil price crash are expected to see an impact on order execution and order inflows of at least 10-15 per cent for the quarter. Working capital will be a key monitorable.

The brokerage expects L&T's adjusted standalone revenues to grow 1.6 per cent year-on-year (YoY) to Rs 29,881.9 crore. "Earnings before interest, taxes, depreciation, and amortisation (EBITDA) is expected to decline 1.6 per cent to Rs 3,152.5 crore with margin expected at 10.6 per cent and adjusted PAT expected to grow 2.97 per cent to Rs 2,458.6 crore, adjusting for exceptional items and aided by corporate tax cut benefit," it said.

Kotak Securities

The brokerage expects a 5 per cent YoY decline in core EPC revenues in Q4FY20 for continuing operations driven by 10 days of negligible revenues. Most segments would report a YoY decline in revenues barring the Hydrocarbon segment.

"We expect core Engineering and Construction (E&C) business to report EBITDA margin of 11.8 per cent in 4QFY20, up 60 basis points (bps) on a low YoY base and down 210 bps versus 4QFY19 levels. The weakness in margin would be driven by ten days of negligible revenues. We expect the key Infrastructure segment to report a decline of 130 bps versus 4QFY19 levels and a modest 30 bps improvement YoY. Low YoY base was impacted by a loss in select transportation segment projects," the brokerage said.

It pegs L&T's net sales at Rs 46,327.7 crore while EBITDA is seen at Rs 5,524.1 crore. Profit before tax (PBT) is expected to come in at Rs 4,628.8 crore while adjusted PAT is seen at Rs 2,782.2 crore.

Edelweiss Securities

Analysts at Edelweiss expect consolidated revenue at Rs 44,938.9 crore for the quarter under review. EBITDA is seen at Rs 5,133.1 crore, while EBITDA margin is estimated at 11.4 per cent for the quarter under review. Net profit / profit after tax (PAT) is seen at Rs 3,000.9 crore. It expects 3 per cent YoY growth in core EPC revenues, excluding E&A business segment. It expects core order inflow of Rs 43,000-45,000 crore. (announced orders worth nearly Rs 37,500 crore in Q4FY20).

Dolat Capital

L&T had guided for a strong order inflow of 10-12 per cent YoY in FY20. Hence, the management's commentary on it will be keenly watched. Also, its comments about the FY21 outlook in terms of revenue and orders will be closely tracked, given the current lockdown situation. It sees consolidated net sales at Rs 48,558 crore while EBITDA is seen at Rs 6,324.5 crore. EBITDA margin is seen at 13 per cent. PAT is projected at Rs 3,756 crore.

At the bourses, shares of L&T tumbled 38.4 per cent during the January-March period as compared to a 28.6 per cent slump in the benchmark S&P BSE Sensex, exchange data shows.



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