Larsen & Toubro share price, Q3 results: Construction and manufacturing major Larsen & Toubro (L&T) reported a steady set of numbers in the October to December quarter on the back of strong momentum in international execution and the energy segment.
Despite muted government capex during 9MFY25, analysts, riding on hopes of a higher domestic capex and strong order inflows going forward, believe L&T is well placed to navigate short-term volatility in the capex cycle, while benefiting from long-term tailwinds of capex growth in India and overseas (Middle East).
On the bourses, following the company's results, L&T share price surged as much as 4.94 per cent, to hit an intra-day high of Rs 3,588.45. However, at 12:25 PM, L&T shares were off highs and trading at Rs 3,551.35, up 3.85 per cent. In comparison, the BSE Sensex was trading higher by 448.84 points, or 0.58 per cent, at 77,208.65.
The company surprised with its Q3/9MFY25 plant and machinery (P&M) order inflow of Rs 98,700 crore/ Rs 2.2 lakh crore, up 64 per cent/18 per cent year-o-year. The growth was led by infrastructure (up 14 per cent Y-o-Y), Energy (up 192 per cent Y-o-Y), and Hi-Tech Manufacturing (up 312 per cent Y-o-Y).
Overall, low margin in the P&M segment coupled with a moderate growth in the tech business impacted consolidated profitability during the quarter. L&T's consolidated earnings before interest, tax, depreciation and amortisation (Ebitda) was around Rs 6,300 crore, up 9 per cent Y-o-Y. Ebitda margin came in at 9.7 per cent (down 77bps/ down 66bps YoY).
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Margin dip was largely on account of a 30bps Y-o-Y decline owing to a larger share of revenue tilted towards the lower-margin P&M portfolio, unlike in Q3FY24, apart from around 40bps Y-o-Y decline due to negative operating leverage in the tech business during the quarter. Q3FY25 P&M margin came in at 7.6 per cent, marginally up (10bps Y-o-Y). ALSO READ: BEL's strong Q3, promising outlook lead brokerages to issue 'Buy' call
L&T reported a steady 14 per cent growth rate in net profits attributable to the owners of the company for October-December 2024 even though it missed Street estimates. For the quarter, L&T reported consolidated net profit of Rs 3,358.8 crore, up from Rs 2,947.36 crore a year ago, supported by a 17 per cent growth rate in net sales of Rs 64,667 crore in the same period. In a Bloomberg poll, analysts had estimated an adjusted net income of Rs 3,771 crore and revenue of Rs 64,742 crore.
L&T’s order books outstanding as of December 2024 were at Rs 5.64 trillion, its highest ever. The company’s new orders won in the quarter hit an all-time quarterly high of Rs 1.16 trillion, and were up 53 per cent from a year ago.
Following the company's quarterly results, here's what rokerages said about Larsen & Troubro:
Nuvama | Retain 'Buy' | TP unchanged at Rs 4,000
L&T delivered stellar Q3FY25 order inflows at Rs 1.16 lakh crore (up 53 per cent Y-o-Y) after a slow H1FY25 along with robust core EPC execution (up 20 per cent Y-o-Y). According to the brokerage firm, the company's Q4FY25 pipeline remains healthy at Rs 5.51 lakh crore, across infra, hydrocarbons and heavy engineering—including four–five large ticket-size orders.
Buoyant order inflows, core operating profit margins remaining intact during Q3 and a positive outlook for consolidated order inflows at Rs 1.16 lakh crore, up 53 per cent Y-o-Y, positively surprised Street after a muted order inflow momentum in H1FY25 given the high base amid a more than 10 per cent Y-o-Y order inflow growth guidance for FY25, which L&T has maintained.
The brokerage firm retained its ‘Buy’ rating on the back of a strong order book of Rs 5.6 lakh crore (42 per cent international) and rising execution, though a margin uptick may still be some time away. "We are revising FY25E/26E EPS by (3 per cent)/ 1 per cent for an unchanged TP of Rs 4,000, valuing the core business at 25x FY27E EPS," it said.
It further believes that core OPM may bottom out at current levels of around 8.2 per cent with FY26E/27E having a path towards 8.5–9 per cent as more projects reach margin recognition milestones by next year. "However, we continue to build in ~8.2 per cent core OPMs till FY27 along with 10–12 per cent OI growth and 12–15 per cent top-line growth, leaving room for further upside," it noted.
Emkay Global | Reiterate 'Buy' | TP maintained at Rs 4,550 (upside 33 per cent)
The brokerage firm said Larsen & Toubro's resilient Q3/9MFY25 performance reflects in its well diversified range of engineering and manufacturing capabilities and exposure to multiple geographies and end-customers.
As a result, L&T’s core P&M revenue/EBITDA has grown 20 per cent/ 22 per cent Y-o-Y in Q3FY25, with approximately 10bps Y-o-Y core Ebitda margin expansion along with strong cash flows and RoE.
Emkay Global believes, the company's 9MFY25 consolidated/P&M order inflow of around Rs 2.7 lakh crore/ Rs 2.2 lakh crore (up 16 per cent/ 18 per cent YoY) is likely to surpass the FY25 initial growth guidance of 10 per cent. The company is already the lowest bidder (L1) in orders worth Rs 50,000 crore.
The boiler turbine and generator (BTG) order from NTPC, Hydrocarbon, Defence (k-9 Vajra-T guns), and the Solar PV and Battery Storage Gigascale Project in Abu Dhabi were the key noticeable orders during the quarter, according to the brokerage firm.
With strong 9M order inflow and a healthy pipeline, the management indicated surpassing initial guidance of 10 per cent. We build in P&M order inflow growth of 12 per cent/11 per cent/10 per cent for FY25/26/27E.
It added that the company's order book at over-3x annual revenue provides enough cushion against the risk of any capex consolidation, the brokerage firm said.