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Larsen & Turbo 3QFY2014 performance highlights and results update

January 24, 2014, Friday, 04:27 GMT | 23:27 EST | 09:57 IST | 12:27 SGT
Contributed by Angel Broking


For 3QFY2014, excluding the performance of the Hydrocarbon business, Larsen and Toubro (L&T) posted a decent set of numbers. During the quarter, pursuant of approval from court, the company demerged and transferred all the assets and liabilities of the Hydrocarbon business to its wholly owned subsidiary L&T Hydrocarbon Engineering (LTHE; w.e.f December 20, 2013). As of 3QFY2014, L&T’s order backlog stands at Rs.171,184cr, indicating a growth of 13.0% yoy. Order inflow for the quarter jumped by 21.0% to Rs.21,722cr, mainly driven by major orders bagged in the Infrastructure segment (85%).
 
Strong performance: On the top-line front, excluding the performance of the Hydrocarbon business, L&T reported revenues of Rs.14,388cr, registering a healthy growth of 11.8% yoy. The healthy growth in revenues was mainly driven by strong execution in the Engineering and Construction (E&C) and the Metallurgical segment. On the EBITDA front, the company reported a yoy increase of 186bp to 11.6%, mainly on account of (a) strong execution in the Infrastructure segment and (b) lower sub contracting expenses. On the bottom-line front, L&T reported a yoy growth of 22.4% to Rs.1,241cr owing to better-than-expected execution and one item exceptional item from asset sale of Rs.104cr.
 
Outlook and valuation: For FY2014, the Management has given a guidance of 15% growth in revenue and 15-20% growth in order inflow and +/- 50bp change in EBITDA margin. We believe given its robust order backlog, healthy order inflows during the past few quarters, and strong execution capability, the company is well placed to achieve its guidance in terms of order inflow. We believe L&T is best placed to benefit from a gradual recovery in the capex cycle, given its diverse exposure to sectors and a strong balance sheet. Going forward, on the back of healthy order book mix, we expect the company to report a revenue and PAT CAGR of 10.8% and 6.1% over FY2013-15 respectively. We maintain our Buy rating on the stock with a target price of Rs.1,237.