My take on L&T Results :
There are already lot of reports on L&T, so I wont talk much on the granular segmental numbers. So, lets keep it simple. We normally see results in positive light when company delivers profit higher than what street would be expecting from them. For top capital goods player, L&T, most important number to watch for this time was order inflow for Q4 and FY19 Order inflow guidance.
Large order inflows in Q4 ensured L&T was able to beat its own guidance. Having said that, it is important to note that Q4FY18 was a particular quarter where we saw more than Rs 160000 cr of order inflows for Capital Goods Sector, highest in last many many quarters. L&T has benefitted from it. I had talked about it a day before on BTVI that this time 10% order inflow guidance is likely from L&T and company announced 10-12% guidance. This implies this is not a huge earth shattering surprise but it is a mild positive in the context that it is suggesting some orders which got delayed are finally moving faster and L&T is seeing a better FY19.
L&T’s revenue and margin guidance are both already factored in average estimate as per Reuters. Average target price would be about Rs 1589 so, thats something positive you could look towards in the future in FY19 but for that company has to fulfill its order inflow trajectory.
On the segmental performance, infra execution was better but I think nothing has changed much. This is a stable business which has predictable rangebound margins on a 12 month perspective. Power, forging still are laggards. Hydrocarbon is showing signs of improvement but margins need to improve from current levels. So, to me, L&T results were good but they were predictable.
I believe this time they will meet FY19 order inflow guidance because Q1 should be around Rs 45000-50000 cr order inflow quarters and that should make the task of Q2 and Q3 easier on order inflow numbers. Q4 is expected to be softer YoY due to election related softness in order awarding.
Overall, a good result and a good company but be realistic and practical in your assessment of the numbers.
For people who love tracking order inflows, here is my prediction for L&T order inflow trends
Q1 Rs 45-50000 cr (Already Rs 27000 cr+ announced so far)
Q2 Rs 40-45000 cr
Q3 Average Rs 35-38000 cr (thats the required rate as per guidance)
Q4 Rs 35-40000 cr (lower than usual average due to elections)
Any surprise on the above trends will set the trend for stock price.