L&T's 3QFY01 net propels 72% - Views on News from Equitymaster

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L&T's 3QFY01 net propels 72%

Jan 30, 2001

Larsen & Toubro Limited has posted a net profit of Rs 333 m in quarter ended December 31, 2000. This is a jump of 72% YoY. The company’s turnover improved by 12% during the period.

(Rs m) 3QFY00 3QFY01 Change 9m FY00 9m FY01 Change
Gross Sales 17,299 19,412 12.2% 50,476 53,458 5.9%
Other Income 260 219 -15.7% 662 1,179 78.1%
Total expenditure 15,737 17,272 9.8% 44,420 48,589 9.4%
Operating Profit (EBDIT) 1,562 2,140 37.0% 6,055 4,868 -19.6%
Operating Profit Margin (%) 9.0% 11.0%   12.0% 9.1%  
Interest 918 1,208 31.6% 2,736 3,070 12.2%
Depreciation 689 789 14.5% 2,033 2,282 12.3%
Profit before Tax & extraordinary income 215 362 68.3% 1,949 696 -64.3%
Profit on transfer of undertaking - -   127 -  
Tax 22 29 34.3% 214 49 -77.1%
Profit after Tax/(Loss) 193 333 72.1% 1,862 647 -65.3%
Net profit margin (%) 1.1% 1.7%   3.7% 1.2%  
No. of Shares (eoy) (m) 249.0 249.0   249.0 249.0  
Earnings per share*       10.0 3.5  
*(annualised)            
Current P/e ratio         74.1  

This is quite a turnaround for the company, which showed an 81% decline in net profit in the first half of FY01. Improved cement realisations have helped the company bounce back. However, even this remarkable turnaround has failed to improve the company's consolidated nine month figures.

On a nine month basis, the company's profits declined by 65% YoY, on the back of a 6% growth in turnover.

The future of its cement business is still not clear. On the one hand, the company's board approved the demerger of cement business subject to necessary approvals. The process of finalisation of scheme of demerger and identification of strategic partner is in progress. On the other hand, L&T commissioned its cement grinding plant of 1 million tonne capacity at Arakkonam in Tamil Nadu in December 2000. With this unit, the total cement capacity of the company has gone up to 15 million tonnes p.a., making it the largest cement company in India.

The L&T stock trades at a P/e multiple of 74 times in annualised nine month FY01 earnings, which looks high. But this is probably because of the expectations that the turnaround in its cement earnings will continue for some time to come.


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