Larsen & Toubro Q4 net beats forecast, shares up
MUMBAI (Reuters) - Larsen & Toubro Ltd posted better-than-expected quarterly results and said it expected 20 percent revenue growth in the current fiscal year due to a pick-up in orders, sending its shares higher.
The country's largest engineering and construction company expected new orders to increase by 25 percent for the year to March 2011, down from 35 percent in the past year but well ahead of a year-ahead growth estimate of 10 percent issued a year ago.
L&T shares closed up 5 percent, their biggest single-day gain in nearly nine months, to value the company at around $20.4 billion.
"The order book growth has been awesome. They have had some issues of client's delaying contracts, but that is inherent in the business," said Shailesh Kanani, analyst at Angel Broking, who has a "buy" recommendation on the stock.
"Things look bright at the moment."
The company reported a 90 percent jump in quarterly orders and said its large order book would boost growth in the medium term. Its order backlog stood at more than 1 trillion rupees ($21.9 billion) as at the end of March, it said.
L&T, which operates in industries as diverse as engineering, shipbuilding and software, has gained in the past few years from a building boom as India revamps airports, roads and expands industrial capacity.
But the global financial crisis pressed firms to scale back expansion plans, pulling back its growth trajectory.
L&T had twice lowered its revenue growth guidance for 2009/10 to 15 percent and then 10 percent, citing project delays. It posted 25 percent revenue growth in 2008/09.
"Power is booming, hydrocarbons looks good because of upstream activity, while urban infrastructure is showing a lot of promise," L&T Chairman A. M. Naik told reporters, outlining segments that would drive growth.
L&T said net profit rose to 14.38 billion rupees in its fiscal fourth quarter ended March from 9.99 billion a year before, helped by one-time gains on the sale of a business and on the buyback of an equity holding by an associate firm.
Excluding one-time gains, net profit rose 17 percent. Net sales rose to 133.75 billion rupees from 104.7 billion. A Reuters poll of 11 banks and brokerages had estimated net profit of 11.9 billion rupees on net sales of 129.9 billion.
Operating margins for the engineering and construction division, which contributes about 80 percent of revenue, rose 60 basis points to 13.6 percent in the year to March, but were almost flat for the March quarter.
The company said it was seeing rising volatility in raw material costs such as steel and copper, posing a challenge to maintaining margins in future quarters.
It plans to spend between 22 billion rupees and 23 billion this fiscal year on its capacity expansion programme at Hazira in western India, to be funded out of internal cash reserves.
Larsen, which has focused on businesses such as financial services and software in the past few quarters in its effort to beat the slowing growth in its core engineering business, said it will decide on a stake sale for its finance unit this year.
It will decide stake sales in its software and infrastructure development arms later.
"We are seriously considering a detailed plan for L&T Finance in the second half of 2010/11 as it is doing very well and can stand on its own feet," Naik said. "We are looking to unlock value. Listing is one of the options."
(Writing by Janaki Krishnan; Editing by Surojit Gupta and David Holmes)
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