Larsen & Toubro (L&T)'s Q2 FY24 net profit rose 5 percent on-year to Rs 3,395 crore, beating Street expectations. A Moneycontrol poll of brokerage estimates had pegged L&T’s second quarter net profit to fall marginally to Rs 3,182 crore.
The engineering and construction major’s July-September revenue rose 21 percent to Rs 61,555 crore, beating the poll estimate of Rs 57,303 crore. Ahead of the results, brokerages said that the sales growth would be driven by execution tailwinds in the infrastructure projects segment, and sustained growth momentum in the IT and ITeS portfolio.
L&T share price has risen just about 17 percent in the last one year, taking the market capitalisation to Rs 4.71 lakh crore. It has underperformed benchmark Nifty 50, which has gained over 27 percent during this period. On October 30, L&T's shares on BSE closed 0.6% higher at Rs 3,402 apiece.
The company said the order inflow for the quarter ended September 30, 2024 stood at Rs 80,045 crore, registering a de-growth of 10 percent over the corresponding quarter of the previous year. L&T said that it had received two international ultra-mega orders in the Hydrocarbon business in Q2FY24 which helped propel its order inflow last year to Rs 89,153 crore at the group level.
International orders were at Rs 50,083 crore, constituting 63 percent of the total order inflows.
"During the quarter, multi-geography orders were received across different segments like Renewables, Transmission & Distribution, Roads & Runways, Urban Transit, Nuclear Power, Hydel & Tunnel, Minerals & Metals, Factories, Precision Engineering and the Offshore vertical of Hydrocarbon business," the company said in a statement.
The consolidated order book of the group was at Rs 5,10,402 crore as on September 30, 2024, with international orders having a share of 40 percent, L&T said. The order book of Rs 5,10,402 crore represents a growth of 7 percent over Rs 450,734 crore as on September 30, 2023 and Rs 4,75,809 crore as on June 30, 2024, the company said.
L&T also reported a 70 basis points fall in its Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin in Q2FY25 to 10.3 percent from 11 percent a year ago, mainly due to a 70 basis points contraction in margins from the energy segment and a 210 basis points contraction in margins from the hi-tech manufacturing segment.
OUTLOOK
Going forward, L&T expects India's economic growth momentum to continue in the medium term facilitated by both public and private capital investment.
"Investment activity has remained resilient, with government capex rebounding from a contraction observed in the first quarter," the company said in a stock exchange filing.
Better-than-expected south-west monsoon augurs well for the revival of the rural economy and consumption demand, L&T said, adding that the government's new employment-linked Incentive schemes could improve availability of skilled / trained labour in India.
L&T said it is cautiously optimistic about the global economic perspective, as investment by middle eastern countries continue in the Oil & Gas, industrialization and the various energy transition initiatives.
However, L&T warned that heightened economic and financial market volatility is likely to continue in the short term until the end of the presidential elections in the United States of America.
"Lastly, heightened economic and financial market volatility is likely to continue in the short term with the US Presidential elections just around the corner," the company said.
Back in May 2024 L&T had said it will aim for a 10 percent on-year growth in its order inflows and a topline growth of 15 percent on year in the financial year 2024-25.
L&T's management had said that going forward it expects private order to continue to make up around 25 percent of L&T's order book.
At the start of 2023-24, L&T's management had said that they expect the engineering major's revenue to grow at 12-15 percent and order intake growth at 10-12 percent in 2023-24.
L&T ended 2023-24 with topline growth of 21 percent at Rs 2.21 lakh crore from Rs. nearly Rs 1.83 lakh crore last year. Similarly, the company's order inflow during FY24 stood at Rs 3 lakh crore, up 31 percent when compared with an order inflow of Rs 2.3 lakh crore seen in FY23.
Infrastructure Projects Segment
Segment-wise, L&T’s infrastructure projects segment secured order inflows of Rs 49,522 crore, during the quarter that ended September 30, 2024, which was much higher around 77 percent higher than order worth Rs 27,990 crore secured in the same period last year.
The segment order book stood at Rs 342,954 crore as of September 30, 2024, with the share of international orders at 32 percent. The segment order book stood at Rs 324,879 crore as of June 30, 2024 and Rs 311,665 crore as of March 31, 2024.
Revenues from the segment rose nearly 30 percent on year to Rs 31,954 crore while profit from the segment rose nearly 50 percent on year to Rs 1550.19 crore.
The rise in profit was mainly on account of a rise in operating profit margin from the segment which rose to 6 percent in Q2FY25 from 5.4 percent in the same period a year ago.
L&T's infrastructure projects segment had seen a sequential fall in operating margins for the seven quarters as the company won infrastructure projects at very aggressive prices after the post-COVID-19, post-Russia-Ukraine (conflict) period in 2022-23.
At the end of June 2023, around 35-40 percent of L&T's then order book of Rs 3,01,159 crore from the infrastructure projects segment was made up of orders that were won at aggressive prices.
Energy Projects Segment
L&T secured order inflows of Rs 7,759 crore in this segment, during the quarter that ended September 30, 2024, which was nearly 81 percent lower when compared to the corresponding quarter of the previous year.
Energy Projects' Segment order book stood at Rs 117,154 crore as on September 30, 2024, with the international order book constituting 77 percent of orders, compared to Rs 117,724 crore as on June 30, 2024,
Revenues from the segment rose 31 percent on year to Rs 8,873 crore while profit from the segment rose 21 percent on year to Rs 709.12 crore.
The EBITDA margin of the segment came in at 8.8 percent for the quarter that ended September 30, 2024, much lower than the 9.5 percent over the corresponding quarter of the previous year, mainly on account of job savings in hydrocarbon and customer claim settlements in the power business.
Hi-Tech Manufacturing Segment
L&T secured order inflows of Rs 3,920 crore in this segment, during the quarter that ended September 30, 2024, which was 64 percent higher when compared to the corresponding quarter of the previous year.
The Hi-Tech Manufacturing Segment order book stood at Rs 35,611 crore as of September 30, 2024 with the international order book constituting 10 percent, when compared to Rs 33,765 crore as of June 30, 2024.
Shankar Raman said that order inflow in the company's Hi-Tech Manufacturing segment has been slow in the first half of FY24 due to the delays in the government awarding defense contracts.
"Going forward we expect the government to aggressively come out with defense orders which will help order inflow of our Hi-Tech Manufacturing segment," Shankar Raman said.
Revenues from the segment rose 9.4 percent on year to Rs 2,063 crore while profit from the segment fell 10.3 percent on year to Rs 209.69 crore. The EBITDA margin for the segment was at 12.8 percent for the quarter as compared to 14.9 percent in the corresponding quarter of the previous year.
IT & Technology Services Segment
L&T's revenues from this segment rose to Rs 11,798 crore during the quarter that ended September 30, 2024, which was 5.5 percent higher when compared to the corresponding quarter of the previous year. International billing contributed 93 percent of the total customer revenues of the segment.
Profit from the segment rose 9.4 percent on the year to Rs 2079.82 crore. The EBITDA margin for the segment was at 21 percent for the quarter as compared to 20.2 percent in the corresponding quarter of the previous year.
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