L&T retains guidance despite 12% y-o-y decline

New Delhi: Concerns that Larsen and Toubro Ltd (L&T) could cut guidance were alleviated as its quarterly results for December were comforting for investors. The industrial conglomerate committed to achieve the 12-15 percent revenue forecast and order flow growth by 10-12 percent in FY19. Despite recording a 12 percent year-on-year decline in order flows in the quarter, the industrial conglomerate has retained guidance. The recent result bodes well for investors as the company had cut guidance in four of the last six years.

Because of deferrals in the transportation and civil infrastructure sectors and bid delays, the decline was largely from the infrastructure segment.

The growth outlook

The rise in Metro and water spends by the states and L&T's conscious focus on new areas will reduce direct dependence on India's central budget, a report by Jefferies India Pvt Ltd says. Growth in overall infrastructure and capex spends are expected to double for the next three years, according to brokerage firm Lavina Quadross.

Also, the 24 percent y-o-y revenue expansion to Rs 35,700 crore in the third quarter boosted investor confidence.  Double-digit growth arose in sub-segments within engineering and construction (E&C), with infrastructure and hydrocarbons leading the way.

The government thrust to finish projects prior to the elections is evident in the conglomerate's 42 percent y-o-y rise in domestic infrastructure revenue, a report by Motilal Oswal Securities Ltd says in its results analysis.

The 22 percent hydrocarbon revenue jump and 50 percent growth in heavy engineering were also impressive. Additionally, L&T maintained its overall EBITDA margin of 11.3 percent, when compared to the year-ago period. EBITDA is earnings before income, tax, depreciation and amortisation.