Last Updated: Saturday, February 6, 2016

IIFL View on Larsen & Toubro (L&T) after Q3 FY16

Larsen & Toubro Ltd (Q3 FY16): Operating margin disappoints but Order inflow surprises Positively

BUY : CMP ₹1,102, Target ₹1,532, Upside 39.0%

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About Larsen & Toubro (L&T)

Larsen & Toubro Limited, commonly known as L&T, is an Indian multinational conglomerate having its headquarter in Mumbai, India. L&T was founded by Danish engineers taking refuge in India, as well as an Indian financing partner. L&T provides a major services in the field of technology, engineering, construction, manufacturing and in finance. View more at official site of L&T.

Key ratios;

  • FACE VALUE (RS) : 2.00
  • MARKET CAP (RS CR): 106,155.99
  • P/E: 21.97
  • INDUSTRY P/E : 16.47
  • BOOK VALUE (RS) : 397.96
  • DIV (%) : 812.50%
  • DIV YIELD.(%) : 1.43%
  • EPS (TTM) : 51.88
  • PRICE/BOOK: 2.86
  • DIV YIELD.(%) : 1.43%
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L&T's FY16- Q3 Numbers highlights;

Money-n-business_L&T's FY16- Q3 Numbers highlights_buy-now

  • Poor operating margin: Operating results failed once again to meet estimates due to sustained margin pressure. 
  • Positive increase in order inflow: However, the company registered 11% yoy increase in order inflow, positively surprising the street.
  • Domestic and international market revenue cracked: Topline growth was marginally lower than estimate due to slower execution in the domestic market. Domestic market revenue was lower by 3% yoy. This was offset by 39% yoy jump in international revenues.
  • Operating Profit Margin: OPM of 10.3% was lower than our estimate of 11.2% due to a sharp decline in infrastructure margins as many large projects were in designing phase and some provisions in heavy engineering segment.
  • Lower margin a big concern:  Lower margins in the core E&C division is a big concern. The management indicated that the sharp fall in margins is largely due to job mix status.
  • PAT growth was led by higher other income (higher treasury gains) and profit from sales of Astra Microwave and Chandigarh Mall.
  • Order inflow beats expectations: Consolidated order inflow of ₹ 38,500cr was quite higher than our expectations. Order book at the end of Q3 FY16 stood at ₹ 256,500cr, higher by 13.6% yoy
  • Slower pickup in execution: Company has reduced its order inflow guidance from 5-7% yoy to 0-5% due to slower pickup in execution in domestic market.

    What IIFL says on Larsen & Toubro Ltd (L&T) after Q3 FY16

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