Analyst Meet / AGM - Analyst Meet

23-May-2013, 10:06
The company held its Analyst Meet on 22^nd May'13 and was addressed by Mr A M Naik, Chairman

Key highlights

• For FY'13, the order book grew by 5% and stands at Rs 1,53,600 crore and order inflow grew by about 25% y.o.y to Rs 88000 crore. This order book does not include slow moving orders which constituted around Rs 5000 crore and have been removed from order book. About 17% of order inflow during the year is from international markets.

• Q4 FY'13 sales were lower due to some execution delay and higher base on y.o.y basis as well. Management indicated that quarterly variances need to ignore and only annual performance need to be analyzed.

• Infrastructure constitutes around 49% of order book, power around 28%, metals around 10%, hydrocarbons around 8% and rest belongs to other segments. Of the total order book, 53% orders are from private players, 34% from public including government and rest are from concession business of subsidiaries of L&T.

• For FY'13, the company faced the challenges of higher raw material costs, higher inflation and increase in staff costs due to manpower addition and compensation revisions, resulting in lower margins on y.o.y basis.

• Rise in funding costs and higher average level of borrowing also resulted in higher interest expenses for the company. Working capital requirements as a % to net sales have gone up to 12% from 8% earlier. The interest rates have still not come down at ground level and management expects that to happen soon.

• Share of international orders and their contribution to sales is increasing, due to continuous thrust on international markets such as West Asia, Middle East and East Asian markets. This is also the fact that the domestic market did not have much to offer in FY'13.

• Investments remain dampened in infrastructure and capital goods space. Within power sector, while uncertainty remains in coal based power projects, the renewable continue to do well. Internationally, Hydrocarbon sector, transportation sector and T&D sector, continues to provide good business opportunities.

• Similarly, construction and mining business was also adversely affected by mining ban and increase in competition. Industrial machinery segment also witnessed pressure due to subdued offtake in capital goods, auto and power sector.

• Overall, management expects GDP to grow around 6% for FY'14. The challenges and environment for FY'14 will be more or less similar to FY'13, but H2 FY'14, will be aided by lower interest rates and increase in government expenditure and will aid the growth.

• The company has bid for few large contracts, worth more than US $ 1 billion and the outcome will come in couple of months from now.

• L&T has total projects in hand of around Rs 65,600 crore of which total equity committed in Mar'13 stood at Rs 5500 crore and about Rs 8700 crore of further equity is required to be committed on these projects in next couple of years.

• For FY'14, the Ebidta margin can go to around 11.5%. While raw material prices are going down, the trend is still not confirmed. The company has good margins in international orders and rupee also helps.

• For FY'14, management expects order inflow to go up by 20% y.o.y and net sales growth of around 15%.

• As per the management, despite continuous challenges, L&T will continue to do well.

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