Improvement in capital cycle pushed the Q1 consolidated net profit of Larsen and Toubro Ltd (L&T) by 46 per cent. The company’s profit increased from ₹610 crore in Q1 FY-17 to ₹893 crore for the quarter ended June 30, 2017.

L&T’s gross revenue has increased by 10 per cent to ₹23,990 crore compared to the same quarter of the previous year. However, there was substantial decline in order inflow — by 11 per cent to ₹26,350 crore in the reported quarter against ₹29,700 crore a year ago. The reason, according to the company, is the large EPC order in the hydrocarbon sector bagged in the first quarter of the last financial year.

“This doesn’t happen every quarter,” SN Subrahmanyan, who has recently taken charge as the CEO and Managing Director said, adding that this quarter the company has done particularly well on the infrastructure side.

“As we see today, there are sufficient bids on hand and prospect visibility,” he said.

R Shankar Raman, CFO, added the dip in order inflows is getting balanced by 16 per cent growth in the infrastructure segment which contributed around half of the company’s order book. Raman noted that domestic order has grown by 12 per cent during the first quarter, while international order grew by 8.5-9 per cent.

Capex game Analysts believe L&T is posed to grow on the backdrop of stronger public expenditure on basic infrastructure such as railways and roads, including new verticals, such as defense, metro lines, affordable housing, water, smart cities, and port initiatives.

“After a long hiatus, there are ten large infrastructure projects ($1 billion each) that are likely to be awarded over FY18-F19, the overall opportunity is $24 billion,” Morgan Stanely report notes.

For L&T, Morgan Stanley forecasts 17 per cent order inflow CAGR during in the next three-four years period as well as 15 per cent core revenue CAGR, driven by domestic business. “While public capex remains the lynchpin of our call on L&T, we build in some return from private capex in CY18, as expected by our economist,” the report says.

Among the segments that have not been doing well for L&T is power which registered a marginal growth of 2 per cent over the corresponding quarter of the previous fiscal at ₹1,763 crore. While the order book in this segment stands at around ₹12,309 crore, the fresh orders recorded during Q1 are just ₹452 crore and the segment EBITDA was at 1.3 per cent in Q1 against 5.8 per cent a year ago.

When asked about the prospects for this vertical, Subrahmanyan told BusinessLine that while boilers segment is doing well, L&T is not getting large order for turbines.

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