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L&T 2019-20 Annual Report Analysis

Tue, 31 Mar

L&T has announced its results for the year ended March 2020. Let us have a look at the detailed performance review of the company during FY19-20.

L&T Income Statement Analysis

• Operating income during the year rose 6.9% on a year-on-year (YoY) basis.
• The company's operating profit increased by 4.3% YoY during the fiscal. Operating profit margins witnessed a fall and stood at 15.3% in FY20 as against 15.7% in FY19.
• Depreciation charges increased by 28.0% and finance costs increased by 18.0% YoY, respectively.
• Other income grew by 26.4% YoY.
• Net profit for the year grew by 5.7% YoY.
• Net profit margins during the year declined from 7.2% in FY19 to 7.2% in FY20.

L&T Income Statement 2019-20

No. of Mths Year Ending		12 Mar-19*	12 Mar-20*	% Change
Net Sales	Rs m	1,413,139	1,510,194	6.9%
Other income	Rs m	39,247	49,611	26.4%
Total Revenues	Rs m	1,452,386	1,559,805	7.4%
Gross profit	Rs m	221,264	230,848	4.3%
Depreciation	Rs m	19,230	24,623	28.0%
Interest	Rs m	95,471	112,695	18.0%
Profit before tax	Rs m	145,809	143,142	-1.8%
Tax	Rs m	43,433	34,919	-19.6%
Profit after tax	Rs m	102,376	108,223	5.7%
Gross profit margin	%	15.7	15.3
Effective tax rate	%	29.8	24.4
Net profit margin	%	7.2	7.2

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L&T Balance Sheet Analysis

• The company's current liabilities during FY20 stood at Rs 1,447 billion as compared to Rs 1,338 billion in FY19, thereby witnessing an increase of 8.2%.
• Long-term debt stood at Rs 823 billion as compared to Rs 741 billion during FY19, a growth of 11.1%.
• Current assets rose 10% and stood at Rs 1,827 billion, while fixed assets rose 12% and stood at Rs 1,216 billion in FY20.
• Overall, the total assets and liabilities for FY20 stood at Rs 3,043 billion as against Rs 2,749 billion during FY19, thereby witnessing a growth of 11%.

L&T Balance Sheet as on March 2020

No. of Mths Year Ending		12 Mar-19*	12 Mar-20*	% Change
Networth	Rs m	620,378	663,217	6.9
Current Liabilities	Rs m	1,338,023	1,447,292	8.2
Long-term Debt	Rs m	741,208	823,313	11.1
Total Liabilities	Rs m	2,749,284	3,042,936	10.7
Current assets	Rs m	1,667,914	1,826,899	9.5
Fixed Assets	Rs m	1,081,370	1,216,037	12.5
Total Assets	Rs m	2,749,284	3,042,936	10.7

L&T Cash Flow Statement Analysis

• L&T's cash flow from operating activities (CFO) during FY20 stood at Rs 67 billion on a YoY basis.
• Cash flow from investing activities (CFI) during FY20 stood at Rs -83 billion on a YoY basis.
• Cash flow from financial activities (CFF) during FY20 stood at Rs 64 billion on a YoY basis.
• Overall, net cash flows for the company during FY20 stood at Rs 47 billion from the Rs -3 billion net cash flows seen during FY19.

L&T Cash Flow Statement 2019-20

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-19	Mar-20
Cash Flow from Operating Activities	Rs m	-47,558	66,939	-
Cash Flow from Investing Activities	Rs m	-110,228	-82,563	-
Cash Flow from Financing Activities	Rs m	154,402	63,716	-58.7%
Net Cash Flow	Rs m	-3,385	46,577	-

Current Valuations for L&T

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 77.1, an improvement from the EPS of Rs 73.0 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 806.9, stands at 11.3 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 1.7 times, while the price to sales ratio stands at 0.8 times.
• The company's price to cash flow (P/CF) ratio stood at 12.0 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-19*	12 Mar-20*
Sales per share (Unadj.)	Rs	1,007.4	1,075.7
TTM Earnings per share	Rs	73.0	77.1
Diluted earnings per share	Rs	72.9	77.0
Price to Cash Flow	x	16.0	12.0
TTM P/E ratio	x	19.2	11.3
Price / Book Value ratio	x	3.0	2.4
Market Cap	Rs m	1,853,356	1,591,873
Dividends per share (Unadj.)	Rs	18.0	18.0

Ratio Analysis for L&T

• Solvency Ratios

Current Ratio: The company's current ratio improved and stood at 1.3x during FY20, from 1.2x during FY19. The current ratio measures the company's ability to pay short-term and long-term obligations.

Interest Coverage Ratio: The company's interest coverage ratio deteriorated and stood at 2.3x during FY20, from 2.5x during FY19. The interest coverage ratio of a company states how easily a company can pay its interest expense on outstanding debt. A higher ratio is preferable.

• Profitability Ratios

Return on Equity (ROE): The ROE for the company declined and down at 16.3% during FY20, from 16.5% during FY20. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

Return on Capital Employed (ROCE): The ROCE for the company declined and down at 17.2% during FY20, from 17.7% during FY19. The ROCE measures the ability of a firm to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company improved and stood at 7.3% during FY20, from 7.2% during FY19. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-19*	12 Mar-20*
Current ratio	x	1.2	1.3
Debtors’ Days	Days	10	10
Interest coverage	x	2.5	2.3
Debt to equity ratio	x	1.2	1.2
Return on assets	%	7.2	7.3
Return on equity	%	16.5	16.3
Return on capital employed	%	17.7	17.2

To see how L&T has performed over the last 5 years, please visit here.

L&T Share Price Performance

Over the last one year, L&T share price has moved down from Rs 1,384.1 to Rs 806.9, registering a loss of Rs 577.2 or around 41.7%.

Meanwhile, the S&P BSE CAPITAL GOODS Index is trading at Rs 10,979.5 (up 1.3%). Over the last one year it has moved down from 18,472.0 to 10,979.5, a loss of 7,493 points (down 40.6%).

Overall, the S&P BSE SENSEX is down 24.2% over the year.

(To know more, check out historical annual results for L&T and quarterly results for L&T)

Read: Latest Annual Report Analysis of L&T