LNT results not bad Huh!!!

May 23, 2011   ·   0 Comments

L&T, as expected did not post a gung-ho set of numbers for Q4FY11. The company posted a net profit of Rs.1686 crore, a 20% rise over Q4FY10 net profit of Rs.1337 crore. But this was a ‘khatta-meetha’ kind of rise as the numbers included an exceptional gain of Rs.226 crore from stake sale in strategic investment. So if stripped of this gain, the rise in net profit was smaller. Yet, the good thing is that profit has grown, not slipped.

www.stockssavvy.comIts net sales rose 11% at Rs.15078 crore. EBIDTA for FY11 was up 47%. EBIDTA margin for FY11 was up by 10 bps at 15.1% v/s 15.2% in Q4FY10. Order inflow was good at Rs.30,300 crore. This is much below the guidance which the company had given, an order inflow of around Rs.37,000 crore. But once again, the market expected a much sharper fall in order inflow and when that did not happen, hope was restored.

A close scrutiny of the numbers shows that order inflow has indeed been good. It was at 15% in FY11 at Rs.79,700 crore and this was despite many orders getting deferred. 38% of the order came in from infra sector, 32% from power, 16% from process industry and hydel power was muted at 7%. 90% of the company’s income comes from projects in India of which 74% comes from the private sector and rest from public sector.

This FY11 performance was despite operational costs at 87%. On the back of rising commodity prices, manufacturing costs were up 17%. It added 6300 new people during year and hence staff cost was up 21%.

And the good news is that, unlike the previous quarters where the company had stated that its projects were facing execution issues, this time around, the company has stated that all its major, big projects are being executed as per schedule.

Yes, the revenue and profit figures are not as good yet, the order inflow instills confidence that it is not as bad as earlier. The management, unlike last two quarters is not as pessimistic and that helps. The company has given a guidance of 25% growth in topline for FY12 despite pressure on margins. Order inflow is seen at 15-20% in FY12.

This is India’s largest private sector capital goods company. And when the management of this company says that things are not as bad as earlier, surely there is a silver lining. Maybe, the worst is indeed over for the company and thus for the sector. The hope inspiring numbers of L&T could probably remove the capital good stocks from the abyss it seemed to have slipped into since the last few months.

When a market leader like L&T signals hope, it sends very strong signals that recovery is happening but slowly. Yes, there remain delays in execution of projects and orders are getting deferred but that is where the Govt needs to step in. There is only this much that the private sector can do; it’s time for the Govt to get to work

Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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