L&T Preview: Consolidated net profit may grow 24% YoY in Q1, share buyback in focus

L&T Preview: Consolidated net profit may grow 24% YoY, share buyback in focus

Infrastructure company and market leader Larsen & Toubro is expected to report a strong year-on-year (YoY) performance in the quarter ended June, led by a healthy order book and execution.

L&T’s consolidated revenue for the June quarter is expected to rise 14 percent YoY to Rs 40,813 crore. Meanwhile, its net profit is likely to grow 24 percent on year to Rs 2,110 crore, as per an average of four brokerage firms by Moneycontrol.

Broking house Sharekhan has the most optimistic revenue and net profit expectation of Rs 42,257 crore and Rs 2,188 crore, respectively, for L&T during the June quarter. The net profit and sales expectations by Kotak Institutional Securities, at Rs 20,12.6 crore and Rs 40,273.6 crore, respectively, were the lowest among the estimates given by four brokerage firms.

Revenue and profit growth

Improved construction activity across projects during the quarter, along with a healthy opening order book, are seen driving revenue growth.

Growth in IT, energy projects, hi-tech manufacturing and developmental projects is expected to drive consolidated revenue growth of 12.4 percent YoY, according to Prabhudas Lilladher.

“Strong tender pipeline from domestic as well as exports market is likely to drive order inflows,” it added.

During the quarter, L&T announced that it had bagged orders in range of Rs 7,500-17,500 crore. The company’s robust order inflow for the June quarter, according to Kotak Institutional Equities, is potentially because of the benefits of upfronting orders before the General elections in 2024.

Margin expansion

Lower commodity prices, along with execution of high-margin orders, could improve the operating margin slightly on a YoY basis.

Analysts expect the operating margin to come in at 11.3 percent in the June quarter, implying a 29 bps expansion on a YoY basis and a contraction of 38 basis points on a QoQ basis.

Key monitorables

L&T recently announced its first-ever share buyback. Details of the buyback, along with the special dividend, will be disclosed by the company today, while announcing the results. Market participants are keenly awaiting these details.

Management commentary on the status of non-core assets such as Nabha power, metro ridership and financial assistance will be other key monitorables, said Prabhudas Lilladher.

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