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3QFY2011 Result Reviews
L&T
L&T reported better-than-expected numbers for the third quarter. On the top-line front, the
company reported healthy growth of 40% yoy to `11,322cr (`8,071cr), above our estimates
of `10,202cr, mainly on account of a pick-up in the E&C segment, which recorded 45% topline
growth to `9,831cr. On the EBITDA front, the company faced margin pressure and
reported lower margins of 10.8% against our expectation of 11.3%. The performance was
below our expectations mainly on account of higher commodity prices along with higher staff
cost. In line with this, we have factored in margin pressure going ahead. Adjusting for
exceptional items (`35.3cr – gains on divestment of part-stake in subsidiary and associate
company and dividend from subsidiary), the company reported bottom line of `797cr
against our estimate of `720cr. Order inflow for the quarter was disappointing at `13,366cr,
taking the outstanding order book to `1,14,882cr.
Given the recent correction of ~20% in the stock price, we believe at current levels it offers
good opportunity for long-term investors as order inflow disappointment is not a long-term
issue as per our analysis, even though the company might miss the inflow guidance of 25%
for the year, but it has a healthy order book to provide revenue visibility for the next few
years. Further, management commentary indicates delays rather than cancellation of orders
and is expecting to do well in the coming quarters. Hence, we recommend Buy on the stock
(the target price is under review and would be given with the quarterly note, which will be
released soon).
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