L&T tumbles on hedging loss concerns

Larsen & Toubro fell 11.15% to Rs 2,655 at 12:11 IST on BSE on concerns of losses from commodity hedging for the fiscal year ending March 2008.

On BSE, 5.4 lakh shares were traded in the counter. The scrip had an average daily volume of 1.85 lakh shares in the past one quarter.

The stock hit a high of Rs 2,980 and a low of Rs 2,615.05 so far during the day. The stock had a 52-week high of Rs 4,670 on 1 November 2007 and a 52-week low of Rs 1,414.10 on 16 March 2007.

The large-cap scrip had underperformed the market over the past one month till 7 March 2008, declining 17.69% compared to the Sensex's fall of 8.85%. It had also underperformed the market in the past one quarter, declining 29.88% compared to Sensex's decline of 19.99%.

The company's current equity is Rs 58.43 crore. Face value per share is Rs 2.

The current price of Rs 2,655 discounts Q3 December 2007 annualized EPS of Rs 66.03, by a PE multiple of 40.20.

Reports suggest that L&T could incur loss of Rs 150 crore to Rs 200 crore from commodity hedging in the year ending March 2008 (FY 2008). The company expects overall margin expansion to offset the losses from commodity hedging.

Brokerage Motilal Oswal Securities had, in a client note, said Larsen & Toubro (L&T) International FZE, a wholly owned subsidiary of Larsen & Toubro, was expected to incur marked-to-market losses on commodity hedging transactions during FY 2008.

Motilal Oswal, which maintained its neutral rating on L&T stock, said it had downgraded its earnings forecast for L&T FZE and expected it to now report a net loss of Rs 92.4 crore in FY 2008, compared to a profit of Rs 85.10 crore a year earlier. It said it had also revised downward its consolidated net profit estimates for L&T to Rs 2400 crore in FY 2008 from a previous estimate of Rs 2590 crore.

L&T's net profit rose 40.1% to Rs 481.79 crore on 55.1% growth in net sales to Rs 6382.68 crore in Q3 December 2007 over Q3 December 2006.

The company manufactures a wide range of engineering products like earthmoving, industrial and chemical machinery, switchgears, valves and welding alloys.