Larsen & Toubro may have trumped the street in the December (Q3) quarter at the revenues and net profit levels, but its profitability was pinched.
 
Margins were expected to take some hit due to rupee appreciation and have, as L&T derived 18% of its gross revenues from global operations in a quarter the rupee rose 1.08% YoY. In the same period, L&T’s Ebidta margins dropped 133 basis points.

An analyst said some projects could be in the early stages of execution, meaning to that extent only costs have been booked and not revenues. In any case the dip in margins is hardly a matter of great concern on a long-term basis.

Revenues grew 55% YoY to Rs 6,382.68 crore, while net profit increased by 40.1% YoY to Rs 481.79 crore.

The stock dipped 1.18% post results on a say the BSE Sensex was down 1.14%.
Revenue growth was led by a 57% improvement in engineering and construction business, which accounted for three-fourth of the total. Electrical & electronics business grew 27.5%, machinery & industrial products 45% and other businesses 42.2%.

Overall operating profit rose 50% to Rs 692.48 crore. Operating profit margins, though, dipped marginally to 10.81% from 11.07% last year’s Q3. This can be attributed to a 58% rise in raw material costs, 63% rise in sub-contracting charges and a 72% increase in sales, administration and other expenses.

Earnings before interest, tax, depreciation and amortisation (Ebitda) rose by 40% to Rs 791.16 crore, while Ebitda margins dropped to 12.4% (13.7%). This can be broadly attributed to a decline of 4.6% in other income.

A rise of 249.8% in interest expenses, 47.7% in depreciation costs and 23% in tax outgo dented the net profit.

Going forward, L&T is in a favourable position to capitalise on the strong outlook for the industry and favourable macro economic conditions. It recorded a growth of 37% YoY in its order inflows to Rs 13,019 crore in Q3.

At Rs 3,844.50, the stock trades at 44.8 times its estimated earnings for 2009. Though valuations seem on the higher side, L&T is good long-term bet in the space.

Source : Dna