L&T net profit up 32% driven by engineering, construction biz

L&T net profit up 32% driven by engineering, construction biz

Mumbai: Larsen and Toubro Ltd (L&T) on Monday announced a 32% rise in net profit for the quarter ended September at Rs765 crore on an 18% revenue growth.

Net profit at India’s largest engineering and construction company by sales included a Rs70.84 crore income the firm earned by selling a part of its stake in Satyam Computer Services Ltd during the quarter.

Chief financial officer Y.M. Deosthalee attributed the earnings growth to a 19% rise in engineering and construction (E&C) revenues and improvement in the pace of project execution.

E&C activities account for around 80% of the company’s business. Its other businesses are electrical, power and hydrocarbon.

“Most of this growth comes from the order book in the beginning of the year. Engineering and construction margins are better both for the quarter and the first half of the year," Deosthalee said, adding the company expects to “maintain the growth for the whole year."

The rise in profit has helped L&T improve its earnings per share to Rs12.45 from Rs9.70.

The scrip rose 1.19% to close at Rs2,013.15 apiece on Monday on the Bombay Stock Exchange even as the benchmark Sensex index rose 0.22% to close at 20,168.89 points.

A.K. Mondal, general manager investor relations at L&T, said the company got Rs20,000 crore worth of new orders in the quarter, up 11% from last year, and about half of this came from the power sector.

“We are still sticking to the 20% increase in revenue guidance for the year because we are expecting a pick-up in the second half," he said. Sales rose 18% to Rs9,260 crore in the September quarter.

Shailesh Kanani, equity research analyst at Angel Broking Ltd said the rise in revenue was unexpected. “The Street was expecting an 11.5% rise (in sales) and so an 18% increase is really good. Also, with execution picking up despite a prolonged monsoon season, the second half could be better," he said.

Ankit Babel, an analyst with Dolat Capital Market Pvt. Ltd, is closely watching the company’s valuations. “Revenues have started coming in from power sector. Now we will have to see whether it can maintain the margins, also valuations after the demerger of subsidiaries such as L&T Finance Ltd. With a guidance of 20% top line (revenue) growth and 25% growth in order inflow, it now looks good," he said.

L&T is in the process of listing subsidiaries in information technology, power and financial sectors in the next three years, starting with L&T Finance.

The company has filed the draft red herring prospectus for L&T Finance, a non-banking financial company that provides leasing services, hire purchase and term loans. It is likely to list in the second half of the year. The exact time of listing will depend on market conditions, Deosthalee said.

The company acknowledged that Rs40,000 crore of projects across India have not be awarded during the quarter because of “structural delays, managerial delays, environmental concerns or because companies are not sure whether they want to add capacity or wait."

L&T’s share in these projects would be 10-15% and the company is confident that it will get its fair share of the projects in the third and fourth quarters, Mondal said.

Its order book is worth Rs1.15 trillion.

“The timelines are getting more elastic and overseas orders have been affected by shifting deadlines in the Middle East. But with increased spending on infrastructure with focus on power and roads, the company is well positioned to convert these opportunities into favourable business prospects," Mondal said.