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L&T: Dismal performance

Oct 30, 2000

Larsen & Toubro has posted a sharp 86% drop in net profits for the quarter ended 30th September 2000. The company has suffered largely on account of the cement division which has been hit by falling realisations. Its engineering and construction division has been unable to contribute to profits as projects are yet to achieve threshold levels.

(Rs m) 2QFY00 2QFY01 Change
Gross Sales 17,258 17,412 0.9%
Other Income 244 633 159.5%
Expenditure 14,992 16,151 7.7%
Operating Profit (EBDIT) 2,267 1,261 -44.4%
Operating Profit Margin (%) 13.1% 7.2%  
Interest 981 1,024 4.4%
Depreciation 685 742 8.3%
Profit before Tax 845 128 -84.9%
Other Adjustments 127 -  
Tax 96 3 -96.9%
Profit after Tax/(Loss) 876 125 -85.7%
Net profit margin (%) 4.3% 0.7%  
No. of Shares (eoy) 249.0 249.0  
Diluted Earnings per share* 14.1 2.0 -85.7%
*(annualised)      
P/e ratio 10.6 74.3  

A substantial rise in other income has failed to trim the decline in profitability. The cement division has been hit by rising costs on one side and falling realisations on the other. As over 30% of its revenues are accounted for by this division, the impact has been devastating.

We have projected a 7% growth in topline L&T for the full year. Profits are estimated to decline by over 42%. So far the company's performance has been way below our estimates. We will be reducing our forecasts in line with current trends in growth.

At its current price of Rs 149, the stock trades at a P/e multiple of 74.3x on annualised 2QFY01 earnings.

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