Larsen & Toubro falls 2% on profit booking post Q3 results

Shares of Larsen & Toubro (L&T) were down 2 per cent at Rs 2,075 on the BSE in Tuesday’s intra-day trade on profit booking after the engineering company reported a consolidated net profit of Rs 2,553 crore for the October-December quarter (Q3FY23, up 24.2 per cent from a year ago.

The company’s revenue from operations in the quarter under review were up 17.3 per cent year-on-year (YoY) to Rs 46,390 crore, aided by strong order inflows and improved execution of projects. Earnings before interest, tax, depreciation, and amortisation (Ebitda) margins also contracted 51 basis points from the same period last year to 10.9 per cent in Q3FY23.

Adjusted standalone revenue was up 8.3 per cent YoY at Rs 27,785.4 crore. Net profit remained flat at Rs 1,825.40 crore. EBITDA was up 10.3 per cent YoY to Rs 2316.9 crore. Margins remained flat on a YoY basis at 8.3 per cent.

At the group level, L&T received orders worth Rs 60,710 crore during the quarter, registering a growth of 21 per cent over the year-ago period.

International orders at Rs 15,294 crore during the quarter comprised 25 per cent of the total order inflow, said the company. For the first nine months of FY23, L&T’s order inflows stood at Rs 1.54 trillion, which was a growth of 30 per cent versus the corresponding period last year. Of this, international orders constituted 33 per cent, or Rs 50,478 crore in terms of value.

With today’s decline, in past one week, the stock price of L&T has declined 6 per cent, as compared to 2.8 per cent fall in the S&P BSE Sensex. However, in past three months, it was up 3 per cent, as against 2.4 per cent decline in the benchmark index. Further, in past six months, it rallied 15 per cent, as compared 3 per cent rise in the Sensex. The stock had hit a record high of Rs 2,297 on January 20, 2023.

L&T reported a strong order book of Rs 3.72 trillion, suggesting good revenue visibility in coming years, according to analysts at ICICI Securities.

As the government is likely to continue the emphasis on infrastructure spending while providing subtle support to consumption and addressing the need for investing in new age technologies to combat the climate change risks, L&T remains the best way to play the capex recovery theme in India given its strong execution capability, presence across diverse sectors and geographies. Focus on monetisation of non-core assets, improving RoEs and reducing debt make it an attractive portfolio bet to ride the infrastructure and manufacturing cycle revival theme, the brokerage firm said.

L&T has targeted revenues and order inflow CAGR of 15 per cent and 14 per cent, respectively, over FY21-26 with a consolidated RoE of 18 per cent. L&T will focus on emerging portfolios like green EPC, manufacturing of electrolysers, battery & cell manufacturing, data centres and platforms (Sufin & Edutech) in the next five years.

Focus on asset monetisation to further strengthen the balance sheet and improve return ratios. Strong b/s, controlled working capital and strong cash generation are key triggers for future price performance, the brokerage firm said. Analysts maintain ‘buy’ rating on L&T with a target price of Rs 2,795 per share.