Shares of India’s major engineering giant Larsen & Tuobro slumped in trade on Monday afternoon, after the firm reported Q4 results on Friday. L&T shares slipped 2.6% to hit the day’s low at Rs 1,319.55 on BSE. For the latest Jan-Mar period, L&T has reported a 8% rise in net profit to Rs 3,418 crore for the latest quarter. The firm had reported a net profit of Rs 3,167 crore in the comparable period previous fiscal. The order wins came in higher at Rs 1.76 lakh crore at the group level during the financial year, registering a 16% on-year growth. The International orders came in at Rs 46,805 crore, constituting 26% of the total order inflow. L&T’s board has also approved a scheme of arrangement for a merger of its wholly owned subsidiary, L&T Shipbuilding with itself.
Taking stock of the reported results, Motilal Oswal said that the cautious guidance reflects election uncertainty. The firm has guided for revenue growth of 12-15%, order inflow growth of 10-12% and core E&C margins of 10.5% for FY20. Motilal Oswal said that the revenue growth was in-line with its expectations, but above the management’s earlier expectations. Motilal Oswal has a buy call on the stock with a target price of Rs 1,850. “We raise our FY20 earnings estimate by 7% to factor in strong order backlog-led revenue growth,” Motilal Oswal said in its report.
Global research firm Nomura noted that the results beat L&T’s guidance on all counts. While the management has guided for strong oder inflows and pick-up in execution, the slowdown in infrastructure ordering, and delay in economic recovery are among the key risks. Nomura has a target price of Rs 1,675 on the shares.
Jefferies has retained a ‘buy’ rating on the shares with a target price or Rs 1,950. This values the firm’s core business at 15 times EV/EBITDA FY21. The firm has lowered EPS by 4-7% to reflect FY19 margin weakness. According to JP Morgan, the margin miss led by infrastructure was disappointing in the quarter.
Sharing it’s outlook for financial year ending March-20, L&T said that the disruption due to the ongoing polls, which have a bearing on the decision making processes could impact key operating parameters in the first half of 2019-20. However, with the momentum on infrastructure building, coupled with incremental tax revenues, the emphasis on investments in areas such as airports, railroads, water supply distribution, expressway programs, power availability is expected to continue, L&T said in a stock exchange filing.
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