Larsen & Toubro has posted a sharp decline in net profits during the quarter ended 30th June 2000. The company has suffered from a drop in operating margins in all three major divisions viz. cement, EPC and electrical business group. The slow growth in topline has also contributed to its bad performance.
The company, in a presentation to analysts, insisted that it quarterly performance is within their expectations. The company also stated that historically L&T's profits vary in greatly from quarter to quarter owing to the uneven flow of large EPC contracts.
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Among the other factors that give cause for concern is the fact that the order book position of the EPC division has actually declined by 13% during the quarter. This highlights the fact that investment activity is yet dull. This has contributed greatly to the lower margins as competition has become more intense. The cement business has performed well in terms of volumes (up 18%). However, net realisations have declined by 7%. The company has stated that over the last few days there has been a significant recovery in prices in all but the eastern region.
L&T has stated that they have finalized the process of identifying the investment bankers for the purpose of proceeding with the restructuring of the company's business, relating to the cement division. They anticipate that the process of hiving off the cement division into a subsidiary would be over within 8 months.
The company currently trades at Rs 202 , implying a P/e multiple of 66x.
Larsen & Toubro (L&T) has announced third quarter results of financial year 2016-2017 (3QFY17). The company has reported 1.7% YoY growth in sales while profits have grown 38.9% YoY. Here is our analysis of the results.
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