L&T gains 3% on winning large orders; rallies 8% in 3 days post Q1 results

L&T share price had hit a record high of Rs 3,948.60 on June 3, 2024. Meanwhile, The management maintained its guidance of 15 per cent revenue growth and 10 per cent order inflow on the higher base of

Share price of Larsen & Toubro today was up 3 per cent to Rs 3,785 on the BSE in intra-day trade, after the company won multiple large orders to build grid elements forming backbone of clean energy transition. L&T classifies orders ranging between Rs 2,500 crore to Rs 5,000 crore as "large" orders.

The stock of civil construction major was quoting higher for the third straight day on Monday, July 29, surging 8 per cent during the period, after the compan announced its June 2024 (Q1FY25) results. L&T share price had hit a record high of Rs 3,948.60 on June 3, 2024.

 

L&T in exchange filing said on Monday, July 29 that the Power Transmission & Distribution (PT&D) business segments had won new orders in India and abroad for establishing substations and transmission lines, which are crucial elements of the vast, interconnected electricity network. 
 

"In India, PT&D has received orders to execute two 765kV Double Circuit Transmission Line packages which are associated with evacuation of power from Jaisalmer/ Barmer Renewable Energy Zone in Rajasthan to substations in Madhya Pradesh for further interconnections. In the United Arab Emirates, PT&D has secured orders to construct a 220kV Substation and three 132kV Substations. Adding these substations to the network will help the utilities keep pace with the increasing electricity demand in Dubai and Abu Dhabi," L&T said.

Meanwhile, L&T said the company received orders worth Rs 70,936 crore at the group level during Q1FY25, registered a year-on-year (YoY) growth of 8 per cent aided by the strong ordering momentum in the Middle East. International orders at Rs 32,598 crore during the quarter comprised 46 per cent of the total order inflow.

On outlook, L&T said with the general elections behind and the likely political stability, the Government’s continued thrust on capex and business optimism augurs well for investment activity. However, the pace of infrastructure progress could slow down due to skilled labour shortage in certain sectors. "The Indian economy is at an inflection point in its path towards greater transformational changes that will bring about more stability and growth," L&T said.

The Company retained the focus on profitable execution of its robust order book in the backdrop of a relatively stable environment. It is well positioned to exploit the emerging opportunities across the diversified business portfolio and limit exposure on non-core businesses.

L&T order inflow & order book

Securing order inflows near the guidance range in a tough quarter, analysts believe, speaks of the diversity of the company’s operations. Those at ICICI Securities, for instance, believe given the backlog growth and pick up in execution in remaining 9MFY25, there remains a strong probability of a beat on the revenue growth guidance going ahead.

“With continued focus on improvement of overall return ratios and aspiration of 18 per cent ROE by 2026 looks a realistic one. Hence, we believe L&T will remain our best capex play in large-cap capital goods space,” the brokerage firm said in a recent note.

The management maintained its guidance of 15 per cent revenue growth and 10 per cent order inflow on the higher base of FY24.

"Margins in core engineering & construction (E&C) business are expected at 8.25 per cent as contribution from international segment is expected to be higher. Though long term Investment activity is expected to be healthy led by public capex, 1HFY25 is expected to remain soft owing to general elections," according to analysts at Centrum Broking.

“Prospects pipeline at Rs 9.07 trillion is lower compared to Rs 12 trillion at the start of the year. Increased international mix in the backlog and increased competition in domestic EPC business coupled with delays in claim acceptance and claim settlements will continue to exert pressure on core E&C margins. As a result, we have increased our revenue assumption marginally higher whereas margin assumption is lower,” the brokerage firm said in a result update note. However, the stock is currently trading above its target price of Rs 3,745.