L&T’s Q3 FY16 operating results were below estimates due to sustained margin pressure. However, the company registered 11% yoy increase in order inflow, positively surprising the street.
Its consolidated core operating profit of Rs. 2,649.89 crore for the quarter, declined by 8.18% yoy but clocked growth of 2.25% qoq. Operating profit margin for the current quarter at 10.26% contracted by 184 bps yoy and 82 bps qoq.
L&T’s Q3 FY16 operating results were below estimates due to sustained margin pressure. However, the company registered 11% yoy increase in order inflow, positively surprising the street. Topline growth was marginally lower than IIFL estimates due to slower execution in the domestic market. Domestic market revenue was lower by 3% yoy. This was offset by 39% yoy jump in international revenues
OPM of 10.3% was lower than estimate of 11.2% due to a sharp decline in infrastructure margins as many large projects were in designing phase and some provisions in heavy engineering segment Lower margins in the core E&C division is a big concern. The management indicated that the sharp fall in margins is largely due to job mix status
PAT growth was led by higher other income (higher treasury gains) and profit from sales of Astra Microwave and Chandigarh Mall Consolidated order inflow of Rs. 38,500cr was quite higher than expectations. Order book at the end of Q3 FY16 stood at Rs. 256,500cr, higher by 13.6% yoy. The Company has reduced its order inflow guidance from 5-7% yoy to 0-5% due to slower pickup in execution in domestic market. Revenue guidance was maintained at 10-15% (9M FY16 @ 9%), while lowering its margin expansion guidance to flat to marginally higher
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