L&T likely to report 19% PAT growth: What to watch in Q2 numbers

Students climb a scaffolding at an outdoor classroom at the Larsen & Toubro (L&T) construction skills training institute in Panvel, in the western Indian state of Maharashtra November 18, 2014. India has too few skilled labourers thanks to decades of neglect in training and it desperately needs electricians, bricklayers and plumbers. Larsen & Toubro (L&T), the country's biggest construction company, says it could face a labour shortage next year, just when it plans to ramp up investment after two years of slow economic growth. It has gone out to rural areas to find recruits and bring them to sprawling training centres from which up to 20,000 students graduate a year, many of them joining L&T. Picture taken November 18, 2014. To match INDIA-WORKERS/ REUTERS/Danish Siddiqui (INDIA - Tags: BUSINESS CONSTRUCTION EMPLOYMENT) - RTR4JKL8

NEW DELHI: Larsen & Toubro is expected to report a 19 per cent YoY growth in profit after tax (PAT) at Rs 817 crore on Tuesday for the quarter ended September 30.

This is against a Rs 687 crore profit the engineering and construction giant had reported for the corresponding quarter last year.

Heavy monsoon and delayed start to new projects in the domestic market are expected to weigh on L&T’s top line, which is expected to grow to Rs 24,057 crore in the September quarter from Rs 23,393 crore in the same quarter last year, analysts polled by an ETNow estimated.

Margins for the quarter are likely to contract to 8.6 per cent from 11 per cent in the year-ago quarter, thanks to weak execution and high overhead cost and continuous losses in heavy engineering and metallurgy & material handling segment.

That said, the September quarter numbers are not comparable, as the company has moved over to IND-AS accounting.

The company has guided for 12-15 per cent sales growth and 15 per cent growth in order flow in FY17.
Overall, the company announced Rs 25,000 crore worth of order flow in Q2 of FY17. Analysts in the ETNow poll said they expect new orders worth Rs 33,000 crore, up 15 per cent YoY in September quarter.

Disappointment on order flow is unlikely, the ETNow poll suggested.

While domestic order wins will be supported by finalisation of large orders, overseas wins could be muted, thanks to a sharp decline in crude oil prices.

Marketmen are expecting the L&T management to maintain its guidance on order inflows, revenue and Ebitda margins.

For September quarter, the infrastructure segment is likely to drive the company’s revenue growth. Analysts are anticipating 8-9 per cent growth in infrastructure, IT and finance businesses, a modest growth in consolidated E&C sales and continued decline in growth in the power, MMH and heavy engineering segments.

Topline and order inflow guidance for FY2017 and beyond, updates on orders from the defence segment and outlook on working capital requirements and profitability of the heavy engineering segment would be factors investors would watch keenly