 "Larsen & Toubro")
Beating estimates, engineering conglomerate Larsen & Toubro (L&T) reported a 44.6 per cent year-on-year (Y-o-Y) rise in consolidated net profit in the September quarter (Q2FY24) on the back of higher revenue and one-time income.
In its outlook for the current financial year, R Shankar Raman, chief financial officer and whole-time director of the company, said he expects the company to outperform the earlier stated guidance.
For Q2FY24, L&T reported a net profit of Rs 3,223 crore, up from Rs 2,229 crore a year ago and Rs 2,493 crore in the previous quarter.
Net sales for the company rose 19.3 per cent Y-o-Y and 6.6 per cent quarter-on-quarter to Rs 51,024 crore. International revenue of Rs 21,898 crore, the company said, accounted for 43 per cent of total quarterly revenue.
The company outperformed Street estimates. In a Bloomberg poll, 12 analysts estimated Q2 consolidated revenue at Rs 50,670 crore and seven analysts estimated an adjusted net income of Rs 2,725 crore.
L&T’s earnings were helped by gains from the sale of commercial property, which was part of the Hyderabad Metro business. Its other income grew 53.4 per cent Y-o-Y to Rs 1,133 crore.
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Both quarterly order inflows and outstanding orderbook were record highs for the company. As of September 2023, the company’s outstanding orderbook was at Rs 4.50 trillion. Order inflows in the quarter gone by, the company said, came in at Rs 89,153 crore, up 72 per cent Y-o-Y.
The company said two-thirds of the order wins in the September quarter was from international markets, with more than 80 per cent of that from West Asia, especially Saudi Arabia.
About concerns over the ongoing war between Israel and the Hamas-ruled Gaza, Shankar Raman said: “Most of our orders are from Saudi Arabia and they seem to have, so far, steered away from entering any conflict.” He further said: “In our assessment, any derailment in their investment programme is unlikely. We will continue to have our ears to the ground.”
On the other hand, S N Subrahmanyan, chairman and managing director of the company, said: "In the near term, we remain cautiously optimistic, considering the recent geopolitical developments. However, we do expect sustained buoyancy of services and the Indian government’s thrust on capex to continue."
In terms of new businesses, L&T announced the incorporation of a wholly owned subsidiary to engage in the business of fabless semiconductor chip design and product ownership. Shankar Raman said the company would restrict itself to the design aspect of the semiconductor value chain and target global markets, with a focus on sectors, such as automobiles.
L&T’s Ebitda margin for the quarter remained weak at 11 per cent, less than 11.4 per cent reported a year ago, which the company attributed to the execution of orders, particularly in the infrastructure segment, won during the pandemic and the lower commodity price cycle.
Shankar Raman noted that margin improvement started in Q2FY24 and should further strengthen over the next few quarters.
About the expected project pipeline for the next 6-12 months, the CFO said, the pipeline looks robust in the range of Rs 8.5-9 trillion, with infrastructure and hydrocarbons being the major contributors. For Q2FY24 alone, the company’s management said, the hydrocarbon business reported an order inflow of $5 billion, its highest ever.
