Larsen & Toubro + Bharti Shipyard – Post Result Analysis

L&T had a solid 3QFY08 with PAT at Rs4.8bn up 40% YoY (8% above consensus estimates of Rs4.5bn and 7% below CIR estimates of Rs5.1bn). This was well supported by net sales growth of 55% YoY and a 48bps YoY margin expansion.

L&T booked Rs130bn of orders in 3QFY08, up 37% YoY, led by the Rs55bn Mumbai Airport and the Rs13bn Cairn Energy orders. L&T ended 3QFY08 with an order backlog of Rs496bn up 39% YoY. Further the company has already booked Rs65bn of orders in the first month of 4QFY08.

Shipbuilding Ready to Roll at Ennore. The BTG (boiler-turbines-generator) facility is likely to be developed in Hazira and L&T is keen to get the clearance and land from the Gujarat government now that elections are over in the state.

Bharti Shipyard:
Bharati Shipyard’s 3Q net income of Rs267m was up 51% yoy but below our expectations primarily due to: 1. lower-than-expected revenue recognition during the quarter, 2. lower subsidy recognition, and 3. operating loss in the windmill division.

EBITDA margins (ex-subsidy), the most important parameter to gauge performance in our view, remained robust at 20%, primarily driven by better utilization at the existing facilities. Subsidies came in a tad lower than expected. However, since Bharati accounts for subsidy on orders only on 70% completion, lower subsidy accounting during 3Q is purely a timing difference, likely to be corrected over the subsequent