To be sure, the second quarter of the fiscal year is a seasonally weak one for capital goods companies, due to monsoons.
The street will also await further updates after L&T emerged as the lowest bidder for the design and construction of 237 km length of viaduct for 508-km Mumbai-Ahmedabad bullet train project. According to a PTI report , the contract is worth Rs 24,985 crore and the construction major is set to bag the largest civil contract of the bullet train project.
Emkay Global expects L&T to report a 22.3 per cent decline in net profit from a year ago, while net sales may have dropped 3.2 per cent as execution was impacted by labor shortage, social distancing norms and deferral by indecisive customers.
“We expect a relatively lower impact in its services business, which should offset the revenue decline. Margins and working capital are also likely to deteriorate on lower resource utilization and difficulty in receivable collection,” Emkay analysts said.
They added that while the announced order inflows for Q2FY21 are about Rs175 billion, the analysts estimate Rs 270 billion of total order inflows during Q2, including service revenues. Prabhudas Lilladher expects L&T to report 55 per cent decline in net profit, while it believes sales may have declined 19.4 per cent.
“Order inflow is expected to remain weak, due to gradual pick-up in demand in 2QFY21,” PL analysts said in a note. L&T is focusing on liquidity management and witnessed a significant headway in the current challenging scenario, they added.
Nomura expects L&T’s recurring profits to plunge by 66.5 per cent, while it believes consolidated revenues may have declined 17.5 per cent.
“Financials will still continue to be impacted by the losses from Hyderabad Metro on a YoY basis post its commissioning in 4Q. There is, however, a potential for L&T to surprise on the upside on order inflows. Working capital levels (the stability of it in absolute terms) will be a key observable,” Nomura analysts said.
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October 27, 2020 at 08:58PM
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L&T Q2 preview: Profits may decline on continued Covid impact - Economic Times
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