L&T: Margins disappoint - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

L&T: Margins disappoint

Oct 29, 2002

L&T, the EPC and cement major, has announced encouraging September quarter results, reporting an 18% growth in topline and a 4% bottomline growth. Operating margins have however come under pressure (down 220 basis points to 6%).

(Rs m)2QFY022QFY03Change1HFY021HFY03Change
Net Sales 17,758 20,940 17.9% 36,068 42,062 16.6%
Other Income 693 515 -25.7% 1,150 977 -15.0%
Expenditure 16,308 19,691 20.7% 32,464 39,249 20.9%
Operating Profit (EBDIT) 1,450 1,249 -13.9% 3,604 2,813 -21.9%
Operating Profit Margin (%)8.2%6.0% 10.0%6.7% 
Interest 902 535 -40.7% 1,844 1,129 -38.8%
Depreciation 818 773 -5.5% 1,635 1,554 -5.0%
Profit before Tax4244577.8%1,2751,108-13.1%
Extraordinary items - -   - -  
Tax (19) (35)81.3% (220) (240)9.1%
Profit after Tax/(Loss) 405 422 4.3% 1,055 868 -17.8%
Net profit margin (%)2.3%2.0% 2.9%2.1% 
No. of Shares 249.0 249.0   249.0 249.0  
Diluted Earnings per share*6.56.8 8.57.0 
P/E Ratio  27.7    27.0  
(* annualised)      

As apparent from the topline growth, the company has recorded strong growth in both its EPC and cement business. A healthy topline growth can be partly attributed to a significant jump in export revenues. For the September quarter export revenues have gone up by 158%. L&T's exports thrust for both its EPC as well as cement divisions seems to be paying off. L&T's cement sales volumes grew by 12% while realisations have declined by nearly 16% on a YoY basis. This has severely impacted the operating margins. Also operating margins of export revenues of the EPC division may be lower than domestic revenues. This may have put further pressure on consolidated margins.

Operating expenses of the company have risen by nearly 21% in the September quarter. A 268% and 25% rise in the construction material and employee costs respectively has considerably increased operating expenses. Employee costs have gone up mainly on account of additional VRS and retirement benefit provisioning. L&T has been able to significantly pare down its interest expenses by retiring and/or restructuring high cost debt. Lower interest expenses have been the main contributor to the bottomline improvement.

The stock is currently trading at Rs 188 at a P/E of 28x its annualised 2QFY03 earnings. EPC business of the company has been the star performer in the current year. Higher exposure to international markets is likely to help maintain a healthy orderbook, albeit at the cost of margins as international markets are highly competitive. Operating margins are also likely to remain subdued due to pressure on cement realisations. Performance of the cement division is likely to remain lacklustre until realisations improve.

The stock has been range bound in the recent past owing to Grasim's open offer (at Rs 190 per share) for L&T's 20% stake. Grasim's interest in L&T has raised the uncertainty over the future vision of the latter. This uncertainty is likely to reflect on its stock price in the short term. Its long term performance however, depends on who gains management control over the company and post that, what are the management's restructuring plans.

Equitymaster requests your view! Post a comment on "L&T: Margins disappoint". Click here!

  

More Views on News

L&T Announces Quarterly Results (1QFY22); Net Profit Up 143.9% (Quarterly Result Update)

Jul 31, 2021 | Updated on Jul 31, 2021

For the quarter ended June 2021, L&T has posted a net profit of Rs 16 bn (up 143.9% YoY). Sales on the other hand came in at Rs 293 bn (up 38.0% YoY). Read on for a complete analysis of L&T's quarterly results.

L&T 2020-21 Annual Report Analysis (Annual Result Update)

Jul 26, 2021 | Updated on Jul 26, 2021

Here's an analysis of the annual report of L&T for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of L&T. Also includes updates on the valuation of L&T.

Why L&T Shares Fell 3% Despite Strong Operating Performance (Views On News)

May 17, 2021

Covid second wave is expected to temporarily slow down L&T's growth momentum, especially during the first quarter of FY22.

Nuvoco Vistas Makes a Lackluster Debut. Stock Lists at 17% Discount (Views On News)

Aug 23, 2021

Nuvoco Vistas witnessed a tepid listing on the bourses despite strong outlook for the cement sector.

Shree Cement Shares Tanks on Poor Operating Performance in the June Quarter (Views On News)

Aug 10, 2021

Shree Cement lags peers in volume growth.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

5 Indian Companies Embracing Blockchain Technology (Views On News)

Nov 23, 2021

Blockchain adoption in India was slow in the past. Now, the technology is being well received.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

L&T SHARE PRICE


Dec 3, 2021 (Close)

TRACK L&T

L&T - COROMANDEL ENG. COMPARISON

COMPARE L&T WITH

MARKET STATS