L&T 2017-18 Annual Report Analysis

Sat, 31 Mar

L&T has announced its results for the year ended March 2018. Let us have a look at the detailed performance review of the company during FY17-18.

L&T Income Statement Analysis

• Operating income during the year rose 10.0% on a year-on-year (YoY) basis.
• The company's operating profit decreased by 0.6% YoY during the fiscal. Operating profit margins witnessed a fall and stood at 14.0% in FY18 as against 15.5% in FY17.
• Depreciation charges decreased by 18.6% and finance costs increased by 12.8% YoY, respectively.
• Other income grew by 222.1% YoY.
• Net profit for the year grew by 22.7% YoY.
• Net profit margins during the year grew from 6.3% in FY17 to 7.1% in FY18.

L&T Income Statement 2017-18

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*	% Change
Net Sales	Rs m	1,086,126	1,195,042	10.0%
Other income	Rs m	14,922	48,065	222.1%
Total Revenues	Rs m	1,101,048	1,243,108	12.9%
Gross profit	Rs m	167,824	166,781	-0.6%
Depreciation	Rs m	23,699	19,287	-18.6%
Interest	Rs m	70,172	79,168	12.8%
Profit before tax	Rs m	88,874	116,392	31.0%
Tax	Rs m	20,066	31,989	59.4%
Profit after tax	Rs m	68,808	84,403	22.7%
Gross profit margin	%	15.5	14.0
Effective tax rate	%	22.6	27.5
Net profit margin	%	6.3	7.1

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L&T Balance Sheet Analysis

• The company's current liabilities during FY18 stood at Rs 1,093 billion as compared to Rs 895 billion in FY17, thereby witnessing an increase of 22.1%.
• Long-term debt stood at Rs 729 billion as compared to Rs 673 billion during FY17, a growth of 8.3%.
• Current assets rose 16% and stood at Rs 1,416 billion, while fixed assets rose 12% and stood at Rs 995 billion in FY18.
• Overall, the total assets and liabilities for FY18 stood at Rs 2,411 billion as against Rs 2,104 billion during FY17, thereby witnessing a growth of 15%.

L&T Balance Sheet as on March 2018

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*	% Change
Networth	Rs m	499,133	545,864	9.4
Current Liabilities	Rs m	895,251	1,092,744	22.1
Long-term Debt	Rs m	673,406	729,148	8.3
Total Liabilities	Rs m	2,104,455	2,411,225	14.6
Current assets	Rs m	1,218,413	1,416,305	16.2
Fixed Assets	Rs m	886,042	994,921	12.3
Total Assets	Rs m	2,104,455	2,411,225	14.6

L&T Cash Flow Statement Analysis

• L&T's cash flow from operating activities (CFO) during FY18 stood at Rs -100 billion on a YoY basis.
• Cash flow from investing activities (CFI) during FY18 stood at Rs 39 billion on a YoY basis.
• Cash flow from financial activities (CFF) during FY18 stood at Rs 94 billion, an improvement of 224% on a YoY basis.
• Overall, net cash flows for the company during FY18 stood at Rs 33 billion from the Rs -2 billion net cash flows seen during FY17.

L&T Cash Flow Statement 2017-18

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-17	Mar-18
Cash Flow from Operating Activities	Rs m	66,553	-100,310	-
Cash Flow from Investing Activities	Rs m	-97,959	39,145	-
Cash Flow from Financing Activities	Rs m	28,959	93,705	223.6%
Net Cash Flow	Rs m	-2,448	32,539	-

Current Valuations for L&T

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 60.2, an decline from the EPS of Rs 73.8 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 1,311.9, stands at 22.2 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 3.8 times, while the price to sales ratio stands at 1.7 times.
• The company's price to cash flow (P/CF) ratio stood at 19.9 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*
Sales per share (Unadj.)	Rs	1,164.2	852.8
TTM Earnings per share	Rs	73.8	60.2
Diluted earnings per share	Rs	49.0	60.1
Price to Cash Flow	x	24.0	19.9
TTM P/E ratio	x	36.3	22.2
Price / Book Value ratio	x	2.6	3.8
Market Cap	Rs m	1,292,158	2,066,039
Dividends per share (Unadj.)	Rs	21.0	16.0

Ratio Analysis for L&T

• Solvency Ratios

Current Ratio: The company's current ratio deteriorated and stood at 1.3x during FY18, from 1.4x during FY17. The current ratio measures the company's ability to pay short-term and long-term obligations.

Interest Coverage Ratio: The company's interest coverage ratio improved and stood at 2.5x during FY18, from 2.3x during FY17. The interest coverage ratio of a company states how easily a company can pay its interest expense on outstanding debt. A higher ratio is preferable.

• Profitability Ratios

Return on Equity (ROE): The ROE for the company improved and stood at 15.5% during FY18, from 13.8% during FY18. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

Return on Capital Employed (ROCE): The ROCE for the company improved and stood at 15.3% during FY18, from 13.6% during FY17. The ROCE measures the ability of a firm to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company improved and stood at 6.8% during FY18, from 6.6% during FY17. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*
Current ratio	x	1.4	1.3
Debtors’ Days	Days	10	10
Interest coverage	x	2.3	2.5
Debt to equity ratio	x	1.3	1.3
Return on assets	%	6.6	6.8
Return on equity	%	13.8	15.5
Return on capital employed	%	13.6	15.3

To see how L&T has performed over the last 5 years, please visit here.

L&T Share Price Performance

Over the last one year, L&T share price has moved down from Rs 1,577.6 to Rs 1,311.9, registering a loss of Rs 265.7 or around 16.8%.

Meanwhile, the S&P BSE CAPITAL GOODS Index is trading at Rs 18,476.7 (down 0.1%). Over the last one year it has moved up from 16,446.0 to 18,476.7, a gain of 2,031 points (up 12.3%).

Overall, the S&P BSE SENSEX is up 12.1% over the year.

(To know more, check out historical annual results for L&T and quarterly results for L&T)

Read: Latest Annual Report Analysis of L&T