L&T Shares Slump On Q1 Profit Miss, Weak Order Inflow

Larsen & Toubro shares slumped 4 per cent on Monday, following the engineering and construction major's weak quarterly numbers, which were announced after markets closed on Friday.

Larsen & Toubro posted a 46 per cent year-on-year jump in net profit at Rs 610 crore in Q1. But the jump in net profit was on account of the shift to new accounting standard (Indian AS norms), analysts said. L&T's Q1 profit was lower than expectations of Rs 811 crore, according to Thomson Reuters.

L&T's operating margin in Q1 stood at 8.7 per cent, also missing Street estimates.

L&T's domestic order inflows continued to be weak, which is the biggest cause of worry for investors. Domestic order inflow in Q1 fell 9 per cent year-on-year, indicating weakness in investment demand.

Overall order inflow (including international projects, which have lower margins), rise by 14 per cent to Rs 29,700 crore, driven by the hydrocarbon, heavy engineering and services sectors.

"Domestic order inflows were weak, even as L&T guided to an order pipeline of Rs 4.25 lakh crore for the remaining nine months of the fiscal," said Religare Securities.

The brokerage retained its "sell" call on L&T, with a target of Rs 1,000.

"We believe the historical capital misallocation is unlikely to correct even as management intends to divest low-return businesses. Also, order inflows and execution are likely to remain below estimates," said Religare's Misal Singh and Prashant Tiwari.

L&T shares closed 4.2 per cent lower at Rs 1,493.70. The stock underperformed the broader Nifty that ended flat.