What should you do with L&T shares post Q3 result: Buy, sell or hold?

L&T reported a 5% y-o-y growth in consolidated profit for Q3 FY21 on the back of highest-ever orders in a quarter. What should you do with L&T shares post Q3 result: Buy, sell or hold?

Larsen & Toubro (L&T) reported a consolidated net profit of Rs 2,467 crore in the December quarter, up nearly 5 per cent from same period last year as lower expenses lent some support to the bottom-line even as revenues were a tad muted.

Higher profit was also attributed to increased profits from IT & TS segment and sale of commercial property in realty. Bottomline also includes gain on divestment of Rs 209 crore from discontinued operations for the quarter ended December, said the company in its release.

The gain of divestment includes sale of the electrical and automation business to Schneider Electric SE and sale of the UK based Marine control & automation systems subsidiary to Rolls-Royce Power Systems AG, it said.

Consolidated net sales in the period under review stood at Rs 35,596 crore, down marginally by 1.78 percent from December quarter last year.

The company’s consolidated EBITDA margin in the December quarter was at 12 percent, up 60 basis point from preceding quarter.

In segment wise businesses, the company’s infrastructure garnered the highest revenue of Rs 15,973 crore in the December quarter but was down 7 percent from same period last year. This was followed IT & Technology Service, where revenue stood at Rs 6,530 crore in the period under review, up 6.6 percent from corresponding period last year.

Infrastructure Segment secured orders of Rs 45,574 crore, during the quarter ended December, up 80 percent on year-on-year basis, with receipt of two marquee orders of High-Speed Rail, said the company release. International orders in this segment constituted 7 percent of the total order inflow.

During the quarter the company was awarded the biggest engineering, procurement and construction (EPC) contract in the country and first of its kind – High Speed Rail order.

With this, the Group order inflow for the quarter ended December 31, 2020 registered a growth of 76 percent over the corresponding quarter of the previous year and stood at Rs 73,233 crore.

International orders during the quarter constituted 14 percent of the total order inflow. On a cumulative basis, the order inflow for the nine months period ended December 31, 2020 stood at Rs 124,846 crore.

Alongside, the consolidated order book of the Group stood at a record high level of Rs 331,061 crore as at December 31, 2020, registering a growth of 9 percent over the March’20 level. The international orders constitute 20 percent of the total order book.

Despite a strong order book, the management refrained from giving any guidance on order flow for the coming quarters.

Though the overall order book of the company looked strong, the management informed that nearly 90-95 percent of its orders were government projects (state and central) as private capex continues to remain subdued amid ongoing pandemic.

“Within the business segments, thermal power and high-end real estate orders have seen no uptick,” informed Raman.

Though, the company remains optimistic about catching up on revenues in coming quarters, making up for first four months lost due to Covid-19, the management informed that headwinds around project execution continues amid a lot of covid-care measure that is impacting productivity.

“The supply chain just coming back as it took some time to adjust to the knocks it got during pandemic. At our end, we are trading with caution in the current situation,” informed the management.

What should you do with L&T shares post Q3 result: Buy, sell or hold? Below is a summary of what some brokerages are saying about the stock and the company after the Q3 numbers:

L&T share price rose over a percent in early trade on January 27 after the company announced its December quarter earnings. However the share lost it’s early gain and traded down over a percent at 11.15 hours.

Disclosure:

EZ Wealth is a Stock Broker registered with BSE, NSE and MSEI in all the major segments viz. Cash, F&O and CDS segments. EZ Wealth is also a Depository Participant and registered with both the Depositories viz. CDSL and NSDL. Further, EZ Wealth is a SEBI registered Portfolio Manager. EZ Wealth is a step-down subsidiary of Wealth Discovery Securities Pvt. Ltd (referred as ‘WDSPL’ hereafter).

This report is not to be altered, transmitted, reproduced, copied, redistributed, uploaded, published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from EZ Wealth.

The projections and the forecasts described in this report are based on estimates and assumptions and are inherently subject to significant uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates on which the projections are forecasts were based may not materialize or may vary significantly from actual results and such variations will likely increase over the period of time. The recipients should consider and independently evaluate whether it is suitable for its/ his/ her/their particular circumstances and if necessary, seek professional / financial advice as there is substantial risk of loss. EZ Wealth does not take any responsibility thereof. Any such recipient shall be responsible for conducting his/her/its/their own investigation and analysis of the information contained or referred to in this report and of evaluating the merits and risks involved in securities forming the subject matter of this report. The price and value of the investment referred to in this report and income from them may go up as well as down, and investors may realize profit/loss

This report has been prepared by EZ Wealth and published in accordance with the provisions of Regulation 19 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014, for use by the recipient as information only and is not for general circulation or public distribution. The solicitation of an offer to buy, purchase or subscribe to any securities, and neither this report nor anything contained therein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. It does not constitute a personal recommendation or take into account the particular investment objective, financial situation or needs of any individual in particular. The research analysts of EZ Wealth have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. The recipients of this report must make their own investment decisions, based on their own investment objectives, financial situation or needs and other factors. Past performance is not a guide for future performance. Actual results may differ materially from those set forth in the projection. This report has been prepared by EZ Wealth based on the information available in the public domain and other public sources believed to be reliable. Though utmost care has been taken to ensure its accuracy and completeness, no representation or warranty, express or implied is made by EZ Wealth that such information is accurate or complete and/or is independently verified.

The contents of this report represent the assumptions and projections of EZ Wealth and EZ Wealth does not guarantee the accuracy or reliability of any projection, assurances or advice made herein. Nothing in this report constitutes investment, legal, accounting and/or tax advice or representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances. Since EZ Wealth or its associates are engaged in various financial activities, they might have financial interest or beneficial ownership in various companies including subject company/companies mentioned in the report. EZ Wealth or its associates have not received any compensation for investment any compensation including brokerage services and for products or services other than investment banking or merchant banking from the subject company in the past 12 months. It is confirmed that EZ Wealth or research analyst or its associates have not managed or co-managed public offering of securities for the subject company in the past 12 months.

Research analyst or EZ Wealth or its relatives’/associates’ have no material conflict of interest at the time of publication of this report. Neither research analyst nor EZ Wealth are engaged in market making activity for the subject company. It is confirmed that research analysts do not serve as an officer or director. No material disciplinary action has been taken on EZ Wealth by any regulatory authority impacting Equity Research Analysis activities. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. This information is subject to change, as per applicable law, without any prior notice. EZ Wealth reserves the right to make modifications and alternations to this statement, as may be required, from time to time. Research analyst or EZ Wealth or its actual/beneficiary ownership of 1% depends from case of case. It is also confirmed that research analysts have not received any compensation from the subject company in the past 12 months.

WDSPL registered address: 1206, 12th Floor, Kailash Building K.G. Marg.
Connaught Place New Delhi-110001

Tel No: 91 +11-43444-666 | 91 +11-43444-623 |

Wealth Discovery Securities Pvt Ltd – CIN: U74999DL2010PTC211626

Wealth Discovery Commodity Pvt Ltd – CIN: U74999DL2011PTC213264

SEBI-NSE-INB/F/E231435737,BSE-INB011435733/INF011435833, DP-IN-DP-CDSL-679-2013 SEBI- REG.NO- MCX & NCDEX – INZ000015731