L&T Q3 results: Net profit rises 15% to Rs 2,947 crore, misses estimates

Brokerages expected L&T to report an over 30 percent YoY jump in profit at Rs 3,324.3 crore.

Larsen & Toubro (L&T) reported a consolidated net profit of Rs 2,947 crore for the December quarter of FY24, up 15 percent from the year-ago period, on better execution of infrastructure projects and continued growth in the IT and tech services portfolio.

Revenue zoomed to Rs 55,128 crore, 19 percent higher from last year, the company said in an exchange filing on January 30.

The numbers were lower than market expectations.

An average of estimates of four brokerages pegged the diversified conglomerate to report an over 30 percent year-on-year (YoY) jump in profit at Rs 3,324.3 crore. Revenue was expected to grow 20 percent to Rs 55,720 crore on the strength of a strong order book.

L&T won orders worth Rs 75,990 crore at the group level during Q3, logging a 25.2 percent growth over the corresponding quarter of the previous year when it had won orders worth Rs 60,710 crore.

During the reporting quarter, orders were received across multiple segments, including public spaces, nuclear power, and the irrigation, ferrous metal, health, renewables and refinery sectors, the company said in a press release.

International orders at Rs 50,562 crore during the quarter comprised 67 percent of the total order inflow. Last year, L&T had international orders worth Rs 15,294 crore which accounted for 25 percent of its total order inflow

The group’s consolidated order book was at Rs 469,807 crore as of the end of December, with international orders having a share of 39 percent. Last year, L&T had ended the same period with a group consolidated order book of Rs 386,588 crore.

Its operating margin for the third quarter of FY2023-24 came in at 10.4 percent, compared to 10.9 percent in the year-ago quarter and 11 percent in the June quarter.

The company's Earnings before interest, taxes, depreciation, and amortisation (EBITDA) came in at Rs 5,760 crore during the quarter 14 percent higher on year, but lower than market expectations.

Analysts had expected the company's EBITDA to grow 22 percent from a year ago, to around Rs 6,178 crore for the reporting period.

Infrastructure Projects Segment

Segment-wise, L&T’s infrastructure projects segment secured order inflows of Rs 43,208 crore, during the quarter that ended December 31, 2023, which was 33 percent higher when compared to the corresponding quarter of the previous year.

The segment order book stood at Rs 317,693 crore as on December 31, 2023, with the share of international orders at 28 percent.

Revenues from the segment rose 27 percent on year to Rs 28,266 crore while profit from the segment fell 7.6 percent on year to Rs 1205.41 crore.

The fall in profit was mainly on account of a fall in operating profit margin from the segment which fell to 5.5 percent in Q3FY24 from 7 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.

The company's chief financial officer R Shankar Raman Raman said that L&T expects its operating margin to start improving from the next financial year as orders won at aggressive prices in 2022-23 will complete execution and new orders start being carried out.

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 13,281 crore in this segment, during the quarter that ended December 31, 2023, which was nearly 47 percent higher when compared to the corresponding quarter of the previous year when the company had won orders worth Rs 9,051 crore.

Energy Projects' Segment order book stood at Rs 112,777 crore as on December 31, 2023, with the international order book constituting 81 percent.

Revenues from the segment rose 24 percent on year to Rs 7870.30 crore while profit from the segment rose 40 percent on year to Rs 695.21 crore.

The EBITDA margin of the segment came in at 9.7 percent for the quarter that ended December 31, 2023, improved compared to 8.7 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 2,043 crore in this segment, during the quarter that ended December 31, 2023, which was 6 percent higher when compared to the corresponding quarter of the previous year.

The Hi-Tech Manufacturing Segment order book stood at Rs 25,758 crore as of December 31, 2023, with the international order book constituting 8 percent.

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," Raman said.

Revenues from the segment rose 17.3 percent on year to Rs 2,184.70 crore while profit from the segment rose 18.9 percent on year to Rs 294.78 crore.

IT & Technology Services Segment

L&T's revenues from this segment rose to Rs 11,325 crore in this segment, during the quarter that ended December 31, 2023, which was 5.7 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 16 percent on the year to Rs 1970.83 crore. The EBITDA margin for the segment was at 20.7 percent for the quarter as compared to 18.9 percent in the corresponding quarter of the previous year.

The segment margin improved due to improved utilization levels in LTIMindtree.

OUTLOOK

Going forward, L&T expects public capital expenditure to witness a temporary slowdown due to the general elections in 2024.

L&T added that the global economy remains volatile with continuing military engagement in Europe and West Asia, disrupting the supply chain and global trade movements.

"The US economy has been resilient so far, but the UK and European economies are weak and the concern around China persists," the company said.

The conglomerate expects West Asian countries particularly Saudi Arabia to continue to pursue their ambitious growth plans in both energy and other sectors.