Larsen & Toubro Ltd. employees work in the heavy engineering division in Hajira, India. (Photographer: Prashanth Vishwanathan/Bloomberg News)

L&T Gets Highest Quarterly Orders; Beats Annual Forecast

Larsen and Toubro Ltd. is expected to have reported its highest quarterly order inflow, topping its guidance first time in at least six years and beating uncertainty ahead of the election.

India’s largest engineering conglomerate, a bellwether for investments, needed fresh orders worth Rs 47,900-50,900 crore in the quarter ended March to meet its annual growth forecast of 10-12 percent. Going by the disclosures through the quarter, L&T received orders in the range of Rs 42,060-69,560 crore during the period. Analysts expect the actual order inflow to be the average of the range or even higher, helping the company surpass its guidance.

Including services, the order inflow could be Rs 69,500 crore for the fourth quarter, Sumit Kishore, an analyst at JPMorgan, wrote in a report. That implies a growth of about 20 percent against the forecast of 10-12 percent since the total order flow for FY19 would touch nearly Rs 1.9 lakh crore compared with the previous fiscal’s Rs 1.52 lakh crore, according to the brokerage’s calculations. Despite virtually no central government orders ahead of polls, the brokerage said the company bagged seven big-ticket contracts accounting for over 50 percent of the cumulative inflows by value, mainly across hydrocarbons and urban infrastructure sectors.

From the fourth quarter, L&T stopped giving exact order details but classified into four buckets in the range of Rs 1,000-2,500 crore (significant); Rs 2,500-5,000 crore (large); Rs 5,000-7,000 crore (major); and more than Rs 7,000 crore (mega) citing competition.

Based on the disclosures made in each of these categories, L&T would have received at least Rs 42,000 crore worth of orders at the lower end and up to Rs 69,000-crore order inflow at the upper end. In the nine months ended December, the company had bagged orders worth Rs 1.2 lakh crore.

CLSA estimates L&T bagged fresh orders worth Rs 54,000 crore during the quarter, meeting its guidance. Bharat Parekh, an analyst at CLSA, said in a note that industrial, private and international orders, along with government capex, drove the growth.

Citi also expects the inflows around Rs 53,000 crore, close to the Rs 55,800-crore mid-point of the range disclosed by the company.

Most of the fresh orders came from hydrocarbons and buildings divisions. The company bagged one mega order each in the hydrocarbons and airport construction segments. About 34 percent each were contributed by state governments and international orders, private companies accounted for 23 percent and the public sector units the rest. It won no projects from the central government ahead of the polls.

Analysts remain bullish. As many as 31 of the 34 analysts tracking the stock have a ‘Buy’ rating, according to Bloomberg data. The average 12-month target price implies an upside of 19 percent.