Larsen & Toubro Ltd (L&T) on July 26 reported 45 percent year on year growth in consolidated net profit at Rs 1,702 crore for the first quarter of FY23. On a sequential basis, the profit declined 53 percent. Despite the strong YoY growth, the profit missed the estimates of a poll conducted by Moneycontrol.com which had forecasted a YoY growth of 55 percent in its consolidated profit.
Consolidated revenues for the engineering, procurement and construction (EPC) giant rose 22.2 percent year on year to Rs 35,853 crore and met the expectations. On a sequential basis, the revenue went down 32.2 percent.
Year on year growth was aided by improvement in core EPC revenues driven by improved construction activity and strong execution across projects.
The company witnessed strong traction in order inflows during the quarter and secured orders worth Rs 41,805 crore at the consolidated level, registering an on year growth of 57 percent. Order from international customers during the quarter stood at Rs 17,842 crore and comprised 43 percent of the total orders booked.
At the consolidated level, the total order book at the end of the quarter stood at Rs 3,63,448 crore, a highest for the company. 28 percent of the total order book is constituted of international orders.
The infrastructure projects segment of the company registered Rs 14,181 crore revenues during the quarter at a YoY growth of 36 percent. The growth was aided by improved execution across the projects. The EBITDA (earnings before interest, tax, depreciation and amortization) margins for the business however, dipped 60 bps on year to 6.5 percent due to cost escalation and change in revenue matrix.
Revenues for the energy projects remained flat at Rs 5,073 crore with a marginal growth of 3 percent on year but witnessed in improvement of 100 bps in its EBITDA margins at 8.5 percent.
The hi-tech manufacturing business had a stable quarter and achieved revenues of Rs 1,272 crore at a YoY marginal growth of 3 percent. It witnessed a sharp decline of 4.1 percent in its EBITDA margins at 15.1 percent for the quarter largely because previous year was higher on release of cost provisions on completion of a key project and recognition of customer claims.
The revenues from its IT & Technology Services surged 30 percent on year to Rs 9,424 crore. International billing contributed 92 percent of the total customer revenues of the segment for the quarter. The revenue in dollar terms for the 3 listed entities at $1,219 million, registered a sequential growth of 3 percent.
L&T’s financial services business dipped marginally by 3 percent on year with revenues of Rs 2,958 crore, mainly due to the targeted reduction in the wholesale order book. The total loan book at the end of the quarter remained stable at Rs 88,078 crore as compared with Rs 88,440 crore during the year ago period.
The financial services business was able to save on credit cost and generated higher fee income which helped it earn an EBIT (earnings before interest and tax) of Rs 356 crore as compared to Rs 234 crore during last year.
Revenues for the development projects business witnessed a healthy growth of 19 percent on year with revenues of Rs 1,345 crore aided by higher plant load factor in its Nabha Power Plant and increase in passenger traffic in Hyderabad metro.
Consequently, the business was able to curtail its losses to Rs 21 crore compared to the losses it had of Rs 91 crore during the same period last year.
Other small business of the company also witnessed strong traction and witnessed a growth of 21 percent YoY in revenues at Rs 1,599 crore aided by higher handover of flats in the Realty business and increase in sales of Rubber Processing Machinery.
In its earnings release the company said that, “The Indian economy continues to sustain the strong recovery momentum evidenced by robust monthly high frequency indicators and the Government’s move to cut taxes on petrol and diesel, imposition of export duty on steel and petroleum, restrictions on food exports and RBI’s recent action of increasing the REPO rate should ease the overall inflationary pressure”.
The company is hopeful that despite the macro and micro-economic challenges, the Government's persistent efforts to jumpstart economic growth through higher infrastructure spend and incentivizing domestic manufacturing should yield benefits in the medium term.
On the global front, despite the uncertainties associated with global economic growth, the Middle east region, an important geography for the Company’s Projects business, is likely to be benefitted from the high oil prices resulting in higher hydrocarbon and infrastructure capex spend. This augurs well for the Company, in terms of providing a larger scope of contracting opportunities.
L&T closed Rs 31.2 lower at Rs 1,751.25 on July 26 on the National Stock Exchange. The stock has generated returns of 9.6 percent during the past one year and 17.1 percent over the past one month.