InvestorQ : Would you be positive on the stock of L&T after the relatively flat results announced by the company for the Dec-20 quarter?
Mitali Bhutta made post

Would you be positive on the stock of L&T after the relatively flat results announced by the company for the Dec-20 quarter?

Answer
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11 months ago
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The overall growth may have been flat but what you need to look at is that the order book has grown sharply in the quarter. We will come back to that point later. The first thing to know is that the Dec-20 quarter net profit of Larsen & Toubro moved up a modest 3.44% at Rs.2648 crore, largely on the back of better order flows. For the Dec-20 quarter, total revenues were flat at Rs.35,596 crore.

In terms of the revenue mix in the quarter, there was negative growth in the infrastructure segment, which includes the cement business and the development projects vertical was also down on yoy basis. However, it must be noted that the revenues from the Power and IT verticals segments were up on a yoy basis. These actually more than compensated for the slowdown in the overall infrastructure business.

Let us now turn to operational profitability. Operating profits were up 3.48% for the quarter at Rs.3578 crore. This improvement was largely on the back of lower outlay on material and sub-contracting costs in the quarter. As a result, the operating margins or OPM grew moderately from 9.54% in the Dec-19 quarter to 10.05% in Dec-20 quarter. In terms of net margins, the PAT margins improved from 7.06% last year to 7.44% in Dec-20.

Let me now turn to the all important aspect of the order book driving the top line of the company in a big and also holding potential for the future. The orders booked by Larsen & Toubro during the quarter expanded 76% on a yoy basis as the company benefited sharply from a revival in capital spending. Its current order book position as of Dec-20 stood at Rs.331,100 crore with global orders accounting for 14% of the total orders.

Even the fall in revenues in the infrastructure segment during the quarter was accounted for by the marginal decline of just 1.78% in revenues as well as by the impact on project site execution due to the stringent COVID restrictions. The slowdown in Hyderabad Metro Operations also impacted the top line. However, the 76% growth in the order flows in the quarter is a signal of solid potential in the coming quarters.

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