L&T Q3 results today: Strong order inflow, liquidity management may aid nos

L&T Q3 results today: Stable supply chain, the government’s focus on liquidity, and steady order flow, analysts say, will drive earnings recovery for capital goods’ companies across execution, new orders and OPM scale up. Among them, Larsen and Toubro (L&T), India’s largest infrastructure company, is expected to report a strong sequential rebound in performance, on January 25, on the back of a healthy order inflow across verticals.

“L&T announced EPC orders worth over Rs 59,000 crore (as on date, ex-services segment) across high speed rail, construction, water effluent, hydrocarbon, transportation, mining equipment, power T&D, heavy civil infrastructure, and defence segments indicating robust order inflows for the quarter,” said analysts at ICICI Securities in a recent report.

Besides, while it adds that the order pipeline remains robust across T&D, green energy corridor, railways, transportation, and water and infrastructure, headwinds around project delays/deferrals and less-than-expected conversion of the tendering pipeline remain.

At the bourses, the stock of the firm outperformed the benchmark S&P BSE Sensex by soaring 42.6 per cent on the BSE during the quarter under review. In comparison, the Sensex index gained around 24 per cent while the S&P BSE Capital Goods index rallied 35.4 per cent on the BSE, ACE Equity data show.

Here’s what leading brokerages expect from L&T’s Q3 results:

HDFC Securities

Analysts at the brokerage forecast a 71.5 per cent sequential growth in consolidated net profit at Rs 1,980 crore for the quarter under review, compared with a profit after tax of Rs 1,151.6 crore in Q2FY21. On a yearly basis, however, the PAT may decline around 16 per cent from Rs 2,352.1 crore clocked in Q3FY20.

The brokerage pegs earnings before interest, tax, depreciation, and amortisation (Ebitda) at Rs 4,170 crore, up 25 per cent QoQ and 1.2 per cent YoY.

Edelweiss Securities

It expects core EPC revenues (ex-E&A) to grow around 12 per cent YoY with core Ebit margins declining by 50bps YoY to 7.3 per cent. The brokerage also expects core order inflow of Rs 70,000–72,500 crore.

Total revenue is seen rising 8.5 per cent YoY to Rs 39,321.7 crore from Rs 36,242.7 crore. On a quarterly basis, the same may grow around 27 per cent from Rs 31,034.7 crore.

Ebitda, meanwhile, is seen at Rs 4,328.3 crore and Ebitda margin at 11 per cent.

Sharekhan

An extremely bullish outlook by analysts at the brokerage pegs the PAT at Rs 2,118 crore for the quarter, down 10 per cent YoY. Revenue is pegged at Rs 39,142 crore.

“L&T’s commentary on infrastructure order execution and order pipeline scenario across the industry along with its outlook on domestic and international tendering activities and order outlook for sub-segments within the infrastructure sector and defense will be tracked. Additionally, management commentary on government capex will also be eyed,” the brokerage said in its report.

Prabhudas Lilladher

Noting that L&T is focusing on liquidity management and witnessed a significant headway in current challenging scenario, the brokerage foresees the net profit at Rs 1,789.8 crore, down 24 per cent YoY. Pre-tax profit, too, is estimated to fall 25 per cent YoY to Rs 2,418.7 crore from Rs 3,223.3 crore clocked in Q3FY20. This would, however, be a 13 per cent QoQ rise from Rs 2,138.2 crore.

ICICI Securities

“We expect reasonable execution pick-up sequentially as labors has almost returned across sites at more than 95 per cent of pre-Covid levels during the quarter. In our view working capital and cash flow situation will be key monitorable,” it said in its earnings expectation report.

Consequently, the adjusted standalone revenue is estimated to grow marginally by 0.5 per cent to Rs 19,984.8 crore. Moreover, Ebitda is expected to improve by 9.9 per cent to Rs 1,608.8 crore with margins expected to improve 30 bps to 8 per cent. Adjusted PAT (ex-E&A ), therefore, may grow by 19.2 per cent YoY to Rs 1,260.6 crore partly due to higher other income.

Phillip Capital

Amid record quarterly inflow during the December quarter, the brokerage expects L&T’s order book to stand at Rs 3.45 trillion, up 16 per cent sequentially and 13 per cent YoY.

“L&T has announced Rs 65,000 crore of ex-services orders in 3Q (assuming average range of new orders) which was its highest-ever quarterly order inflow. Given this, revenue may grow 25 per cent from September quarter to Rs 38,644.5 crore,” it said in its report.

The brokerage, however, expects Ebitda to remain flat on a yearly basis, at Rs 4,128.3 crore, with Ebitda margins likely down 68 bps YoY as “lower margins in services (Financial and Developmental projects) drag down flat margins in like to like Ex-services”.

Moreover, it estimates an 18 per cent YoY drop in net profit at Rs 1,935.1 crore on higher depreciation and interest costs and lack of contribution from E&A (part of base).