L&T Q3 net up 40 pc, raises revenue forecast

Written by Reuters | Mumbai, January 28: | Updated: Jan 28 2008, 20:45pm hrs
Larsen & Toubro Ltd, India's No. 1 engineering and construction firm, on Monday beat forecasts with a 40 per cent jump in quarterly profit on higher sales and raised its revenue outlook for 2008.

India's booming economy has boosted orders for L&T, whose heavy engineering and construction activities contribute about 70 per cent of its total sales, but its shares fell as much as 5.5 per cent in a weak Mumbai market.

The company had an order backlog of about Rs 500 billion at end-December, Chief Financial Officer Y M Deosthalee said.

"We expect revenue to grow 35-40 per cent for the full year," he told Reuters by telephone from Dubai, where the company's board met to finalise quarterly results. "Earlier we were saying that our revenue would grow 30-35 per cent."

L&T, which also makes electrical equipments and heavy machinery and runs software services, said net profit rose to Rs 4.82 billion in the fiscal third quarter to Dec. 31 from 3.44 billion reported a year earlier.

Net sales rose almost 55 per cent to Rs 63.82 billion from 41.18 billion.

Analysts polled by Reuters Estimates had expected net profit of Rs 4.63 billion on sales of 55.47 billion.

Shares in L&T ended down 1.2 per cent at 3,844.50 rupees, while the main index was off 1.14 per cent. The shares had fallen as low as Rs 3,675 in the morning.

"A strong order pipeline will drive the company's future growth," said Pritesh Chheda, a sector analyst with Emkay Share and Stock Brokers Ltd.

The stock had nearly tripled in 2007 and was the second biggest gainer among the index components, while benchmark rose 47 per cent.

MARGINS RISE

L&T has benefited from a construction boom as India pours billions into upgrading airports, highways, ports and power plants, while stronger oil prices have boosted demand for construction and equipment in the Middle East.

Analysts say India's construction and engineering companies are set to produce the best returns for investors for a third year running.

L&T's operating margin in the engineering and construction division grew to 12 per cent from 11.4 per cent a year earlier, while the smaller machinery division margins rose by 6.5 percentage points to 21 per cent, Deosthalee said.

"We have been focusing on higher value jobs," he said. "Inspite of the volatile markets we have been able to bring about improvement in our operations."

Deosthalee said the company expected new orders to rise more than 30 per cent with most coming from the infrastructure and hydrocarbon sectors.

Order inflows during the December quarter grew 37 per cent to Rs 130.2 billion. Overseas orders contributed 18 per cent of total revenue.

Deosthalee said the company had no immediate fund raising plans, after raising about $1 billion in the last one year.

L&T shares rose 48.3 per cent in the December quarter, outperforming a 17 per cent rise in the main index.