Engineering and construction major Larsen & Toubro is expected to report double-digit yearly growth in March quarter earnings on strong execution. Sequential performance is also expected to be robust given strong order inflow.
Profit is likely to grow in the range of 10-25 percent YoY, but sequential growth could be 30-90 percent, brokerages said, adding revenue may increase over 10 percent YoY.
For Q4FY19, Motilal Oswal expects revenue growth of 11 percent YoY to Rs 45,200 crore. "We have factored in 11 percent YoY growth in the E&C segment driven by execution in the domestic segment," it said.
L&T is likely to lead Q4FY19 with strong order inflows, said ICICI Securities. Company has announced orders in excess of Rs 47,000 crore and is expected to report strong order inflows growth during the quarter.
It has secured orders worth more than Rs 16,000 crore in hydrocarbon, Rs 18,000 crore in construction, Rs 3,500 crore in power T&D and around Rs 9,500 crore in water & effluent treatment segment.
Edelweiss said it expects 14 percent YoY growth in core EPC revenues led mainly by the infra segment. Services businesses are expected to grow at 25 percent, it added.
Kotak also expects 13 percent growth in core EPC execution in Q4FY19, leading to around 17 percent growth for the full year in core EPC.
"Infrastructure segment will report a modest around 8 percent revenue growth in line with opening backlog that was up 9 percent YoY. The biggest growth driver is expected to be the hydrocarbon segment, growing 28 percent YoY in the quarter continuing the robust performance from 9MFY19 (+32 percent) on the back of strong order inflows that constituted 16 percent share of core E&C order inflows in 9MFY19," the brokerage said.
Among other segments, heavy engineering will likely report high double-digit growth, E&A will sustain 10-11 percent growth and power segment will see another quarter of decline based on our analysis of order book, it added.
At the operating level, Motilal Oswal expects operating profit margin to improve by 60bp YoY to 13.9 percent in Q4FY19.
"We expect core E&C business to report EBITDA margin of 13.5 percent in Q4 in a seasonally strong quarter that provides operating leverage benefits. This margin will also improve FY2019E core E&C margin by 25 bps as guided by the management," Kotak said.
Among individual segments, margin remains a function of job mix and execution stage, it added.
Key monitorables would be working capital, and order inflow, revenue and margin guidance for FY20.
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