L&T - Q1FY2014 Result Review - Angel Broking

Larsen and Toubro (L&T) posted disappointing set of numbers for 1QFY2014, which were below our and street expectation on both, revenue and profitability front. This was mainly on the back of lower-than-expected execution and poor operating performance. The top-line stood at Rs. 12,555cr, registering a growth of 5.0% yoy for the quarter and was lower than our and street estimate of Rs. 13,100cr and Rs. 13,487cr respectively. The slow execution was mainly on the back of poor performance in power and metallurgical segment. On the EBITDA front, company reported a yoy dip of 56bp to 8.5% against our expectations of 10.5%, owing to lower-than-expected execution and high construction and sub contracting cost. On the bottom line front, L&T reported a yoy decline of 16.2% to Rs. 756cr which was lower than our estimate of Rs. 911cr. This was mainly on the back of lower-thanexpected execution and poor operating performance.

L&T's order backlog stands at Rs. 1,65,393cr as of 1QFY2014, registering a growth of 8.0% yoy. Order inflows for the quarter came in at Rs. 25,159cr (up 28.4% yoy) against our expectation of Rs. 30,000cr.

For FY2014, the management has given a guidance of 15-17% growth in revenue and 20% growth in order inflow. The guidance is mainly based on (a) high share of exports in both order inflows and revenues (power T&D and hydrocarbon) and (b) continued momentum in infrastructure segment (building and factories, railways, airports, etc).

We believe L&T is best placed to benefit from the gradual recovery in the capex cycle, given its diverse exposure to sectors, strong balance sheet and cash flow generation as compared to its peers. We continue to remain positive on L&T while our target price is under review.

Source : Equity Bulls

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