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Thursday, October 16, 2008

LARSEN & TOUBRO Remain Invested

Larsen & Toubro has posted gross sales of Rs.7,777 crores for the quarter ending September 2008, registering a growth of 40% over the corresponding quarter of previous year. Total income for the quarter grew to Rs.7,842 crores (Rs.5.523 crores for quarter ending Sept. 07) registering a growth of about 42%. This is more than expectations, as 35% growth in topline on an annualized basis is being projected by the analysts for the company.

However, disappointment came from pressure on margins, which has resulted into a lower growth at operating profit and net profit levels. EBIT for the quarter is at Rs.760 crores against Rs.561 crores of the corresponding quarter of previous year, recording a growth of 35.50%. PAT rose to Rs.460 crores (Rs.348 crores) which grew by 32%. Interest costs increased to Rs.69 crores against Rs.13.24 crores for Sept. 07 quarter and Rs.38.24 crores for June 08 quarter.

Inspite of global slowdown, the company secured fresh orders of Rs.12,453 crores during the quarter, which recorded a y-o-y growth of 74%. Of this, engineering & construction orders are of Rs.10,434 crores, registering a growth of 90%, with share of international orders at 22%. As at 30-09-08, this division had an order book of Rs.60,931 crores with share of international orders being 17%.

EPS for first half of the company, on expanded equity base of Rs.117 crores, is at Rs.16.50. Generally, September quarter of the company is always lean while March quarter is robust. On full year base, FY 09 EPS, should be close to Rs.48.

Post result announcements, the share price of the company fell by about 10% to Rs.900. On expected FY 09 earnings, share is ruling at a PE of less than 20. The company is confident of posting a growth of about 30% in topline and bottomline for FY 09 and FY 10, which looks possible, considering its order book and improvement in its margin from 10.60% to 11% in its engineering and construction division, from which 80% of the company’s turnover comes.

One may not be able to catch the bottom for the stock, but those who have 12 month horizon, can contemplate buying at Rs.900 levels and those who are holding it are advised to remain invested.
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