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Informist, Thursday, Jul 18, 2024

 

By Rajesh Gajra

 

MUMBAI – L&T Technology Services Ltd dismissed concerns of investors and analysts about fall in margins due to decline in revenue and rise in certain operating costs in the quarter ended June as anticipated and seasonal in nature. In a post-earnings investor call, the management said that there was no change in the company's aspiration of 15?rnings before interest and tax margin for 2024-25 (Apr-Mar).

 

The company will update its position on EBIT margin in an investor day programme it is organising in August. L&T Technology's EBIT margin contracted to 15.6% in Apr-Jun from 16.9% a quarter ago and 17.2% in the same quarter a year ago. This was on the back of a 10.4?ll in EBIT to 3.84 bln rupees.

 

The company's earnings before interest, tax, depreciation, and amortisation contracted to 18.5% from 19.8% a quarter ago and 19.7% a year ago. The management said this was mainly due to fall in margins in two of three business segments.

 

The EBITDA margin in the hi-tech vertical of the company contracted sharply to 12.6% from 15.6% in the previous quarter. This, according to the company, was due to a hard seasonality hit on the smart world communications sub-segment, which it believes will normalise going forward. The hi-tech vertical contributed 34.8% to the total revenue of 24.62 bln rupees in the June quarter.

 

The EBITDA margin of the sustainability vertical, which had a revenue share of 30%, also contracted to 27.1% from 28.8% a quarter ago. The management said this was mainly due to the weakness in industrial products sub-segment.

 

The EBITDA margin in the mobility vertical, which had a revenue share of 35.2%, moved up to 18.8% in the June quarter. According to the management, this was "due to a new large deal that started off in Apr-Jun."

 

The margins of the company were hit in the June quarter by revenue de-growth as well as a sharp increase in selling, general and administration expenses. The consolidated revenue from operations declined 3.0% on quarter to 24.62 bln rupees, missing Street estimates of 25.22 bln rupees.

 

A sharp rise of 15.5% on quarter in the selling, general and administration expenses to 2.65 bln rupees hit the company's margins. Interestingly, a 3.6?cline in cost of sales buffered the impact on gross margin which increased marginally to 29.3% in Apr-Jun from 28.9% in the previous quarter, data from the company's investor presentation showed.

 

The management attributed the sequential decline in revenue to the seasonality factor arguing that the same thing had happened in the year ago quarter. It, however, retained the revenue guidance of 8-10% for 2024-25 (Apr-Mar), and said that September onward the revenue will move upwards. It said that this is seen from the doubling of its deal pipeline as compared to the same time a year ago, and believed that this along with a few new deals will enable the guidance to be met.

 

L&T Technology's consolidated net profit for the June quarter fell 8.0% sequentially to 3.14 bln rupees and was below analysts' estimate of 3.25 bln rupees.

 

Today, shares of the company ended 0.4% lower at 4,849.95 rupees on the National Stock Exchange.  End

 

Edited by Ashish Shirke

 

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