L&T Q2 results preview: Profit may rise up to 19% YoY; margins could shrink

L&T Q2 results preview: The engineering, procurement and construction (EPC) major's core revenue is expected to have grown in Q2FY25 as its domestic execution normalises

L&T Q2 results preview: Larsen & Toubro, which is scheduled to report its second quarter results on Wednesday, October 30, is expected to post core profit growth between 12 and 19 per cent in the July-September quarter (Q2) of the current financial year 2024-25 (FY25).

 

The engineering, procurement and construction (EPC) major's core revenue is expected to have grown in the September quarter as its domestic execution normalises on the back of a strong order book and its workforce strength returning to normal levels following the 2024 General Elections. 

However, analysts tracking the company have sounded a word of caution in terms of order inflows for the company during the quarter due to a higher base-effect in the previous-year quarter, coupled with no major international deal wins in the quarter gone by. 

 

How is L&T's Q2 results likely to be?

L&T is expected to report a 18.5 per cent year-on-year (Y-o-Y) growth in core revenue at Rs 41,400 crore, from Rs 34,900 crore in the year-ago period. Sequentially, it is expected to have grown 7.1 per cent, according to estimates by BNP Paribas. 

The company's overall revenue is likely to have grown 14.3 per cent to Rs 58,300 crore, from Rs 51,000 crore in the year-ago quarter, while profit for the quarter is pegged to have declined 2.1 per cent YoY and 13.3 per cent sequentially to Rs 3,200 crore. 

In terms of operational performance, the company's earnings before interest, tax, depreciation and amortisation (Ebitda) is likely to have grown 5.6 per cent to Rs 6,000 crore, from Rs 5,600 crore in the year-ago period. 

The company's Ebitda margin is likely to have declined 84 bps to 10.2 per cent, from 11 per cent in the year-ago period. 

L&T Q1FY25 financial performance

The engineering conglomerate had reported a rise of 11.7 per cent in consolidated net profit for the June quarter (Q1FY25) at Rs 2,786 crore. 

Meanwhile, its revenue for the period rose 15.1 per cent to Rs 55,210 crore on a year-on-year (Y-o-Y) basis. 

The company's outstanding order book for the first quarter of fiscal 2025 stood at Rs 4.90 trillion, with the international segment's share coming in at 38 per cent.

What do brokerages expect from L&T's Q2 results?

Kotak Institutional Equities

The brokerage firm expects Larsen & Toubro's core EPC revenues to grow 14 per cent YoY following the weakness in domestic execution that is likely to have been offset by a stronger overseas execution. 

Further, Kotak expects the company's core engineering and construction business' Ebitda margin at 7.8 per cent, up 40 bps YoY from a low base of margin. Apart from that, it expects the company to benefit from the impact of lower steel prices from the second half of the current fiscal year. 

Kotak also expects the company to report a 12.9 per cent YoY rise and a 4.5 per cent increase sequentially in topline at Rs 57,591.9 crore, from Rs 51,024 crore in the year ago quarter and Rs 55,119.8 crore in the pervious quarter. 

Meanwhile, it expects the company's Q2 Ebitda to increase 12.2 per cent YoY and 12.5 per cent quarter-on-quarter, to Rs 6,316.9 crore, from Rs 5,632.0 crore in the year ago period, and Rs 5,615.3 crore in the previous quarter. 

However, Ebitda margin is expected to decline 7 bps annually and increase 78 bps sequentially, to 11 per cent. 

According to the brokerage firm's estimates, the company is expected to report a 1.1 per cent rise annually and a 16.9 per cent rise sequentially in second quarter profit after tax at Rs 3,256.9 crore. 

IIFL Securities

Brokerage firm IIFL Securities expects Larsen & Toubro to report a 13 per cent YoY rise in Q2FY25 revenue at Rs 57,850 crore, while it expects the company's operating margin to decline 60 bps annually to 10.4 per cent. 

Meanwhile, it expects the company's bottomline to fall 7 per cent YoY to Rs 3,000 crore. 

The brokerage firm has assigned an 'Add' rating on the stock.

Key risks and concerns

In terms of headwinds, brokerage firm Motilal Oswal Financial Services has flagged a slowdown in order inflows, delays in the completion of mega and ultra-mega projects, a sharp rise in commodity prices, increase in working capital needs, and increased competition as a few downside risks for the company.