L&T Q3: Robust income and orders, however margin pressures weigh on inventory

Larsen and Toubro (L&T) introduced its quarterly outcomes on Tuesday put up market hours. The inventory fell by 4.2 per cent on Wednesday on account of EBITDA and internet revenue lacking consensus estimates by 3.7 per cent and 9.2 per cent, respectively. This was primarily pushed by standalone segments, together with infrastructure, power and hi-tech manufacturing which comprise round 60 per cent of its whole income.

The corporate’s core engineering and consulting income grew by 25 per cent year-on-year (y-o-y) to ₹39,300 crore. EBITDA margins declined 80 bps YoY to 7.7 per cent as core EBITDA grew 13 per cent y-o-y to ₹3,000 crore on account of L&T (standalone) witnessing margin pressures in its infrastructure section (74 per cent of revenues) in Q3 FY24.

Whereas income of the section grew round 27 per cent aided by strong execution momentum, the corporate reported an EBITDA margin of round 5.5 per cent towards 7 per cent reported in Q3 FY23. Margins mirror persevering with value pressures in a couple of legacy tasks that are anticipated to be accomplished by FY25. It will proceed to stay a monitorable for the corporate. At ₹43,208 crore, order inflows grew a strong 33 per cent, pushed by marquee orders, particularly, in energy transmission and distribution enterprise.

The hi-tech manufacturing section, too, noticed margins dipping from 17.5 per cent to 16.7 per cent on account of decrease margins in defence manufacturing area.

Additional, the power section noticed y-o-y income progress of round 24 per cent and margin enlargement from round 8.7 per cent to 9.7 per cent, primarily on account of job financial savings in hydrocarbon and buyer declare settlements within the energy enterprise.

Robust order inflows

Orders within the power section grew 47 per cent, pushed by receipt of a mega order in offshore vertical of hydrocarbon enterprise. Within the December ended quarter, 35 per cent y-o-y improve within the order inflows into the corporate’s core segments, pushed by infrastructure and power verticals.

The administration had earlier given a steering of an general order influx progress of round 10-12 per cent which it has revised to round 20 per cent as a consequence of wholesome order pipeline. Additional, from the sooner income progress steering of round 12-15 per cent for FY24, it has additionally been revised to greater than 15 per cent which the corporate now expects to exceed as a consequence of stronger execution and wholesome order pipeline.

Nevertheless, whereas prospects look good, the expectations appear to have already constructed into the inventory. 

Over the past one yr, the inventory has gained practically 64 per cent on account of the robust order pipeline, expectation of personal capex revival and wholesome outlook. Its trailing P/E of round 50 instances is round 28 per cent larger than the historic five-year common P/E of round 39 instances.