L&T shares fall over 4 per cent on weak Q2 numbers

Shares of L&T have fallen over 4 per cent in early trade on Thursday on its reporting a 45 per cent y-o-y decline in profits for the September quarter.

The stock has dropped after nine days of consecutive gain and touched an intraday low of ₹935.55 (down 4.89 per cent) on BSE.

The capital goods sector has fallen by 2.77 per cent in today's trade.

Q2 Comment

With most of its workforce returning to the sites and execution of projects slowly returning to normalcy, Larsen and Toubro reported a 46 per cent sequential growth in consolidated revenues in the September 2020 quarter. However, on a y-o-y basis, the consolidated revenues were down 12 per cent to ₹31,035 crore.

While the company reported an optically higher profit after tax of ₹5,824 crore – up 110 per cent y-o-y, much of this was on account of gains from the sale of the Electric and Automation division (about ₹8,100 crore). The company also recorded one-time impairment losses worth ₹3,372 crore on the Nabha Power Plant, Hydel Power Plant in Uttarakhand, and the funded exposure in the heavy forgings facility (JV).

Excluding these non-recurring gains and losses, L&T reported a 45 per cent y-o-y decline in profits in the September quarter. Aside from the drop in revenue, a y-o-y increase in depreciation and interest expenses — predominantly in the Hyderabad Metro division — led to a 45 per cent decline in the company's profits to ₹1,410 crore. EBITDA margins (consolidated) for the quarter dropped by 70 basis points (y-o-y) to 10.7 per cent, due to the early stage of project execution.

While the September quarter numbers still reflected the lingering effects of the pandemic-led lockdown (both on domestic and international businesses), revival in order inflows during the quarter could be the tell-tale signs of recovery in the coming quarters.