Earnings Outlook
Strong order execution to help L&T increase PAT, revenue
This story was originally published at 15:31 IST on 27 January 2025
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By Avishek Rakshit
KOLKATA – Larsen & Toubro Ltd., one of India's largest infrastructure project developers, is expected to have benefited from substantial order inflows and project executions in Oct-Dec, propelling its revenue and profit growth.
According to the average of estimates from nine brokerages, L&T is expected to post a 24.6% on-year increase in consolidated net profit for Oct-Dec at INR 36.7 billion. Consolidated revenue is seen rising 19.5% on year to INR 658.5 billion. On a sequential basis, the profit may increase 8.1% and revenue could go up nearly 7%.
L&T will declare its Oct-Dec results on Thursday.
The company, which was recently named one of the preferred contractors by Abu Dhabi Future Energy Co. PJSC for partial construction of a solar photovoltaic and battery storage project, logged a net profit of INR 29.5 billion in the December quarter of 2023-24 (Apr-Mar) and nearly INR 34 billion in Jul-Sept. Its revenues were INR 551.3 billion in Oct-Dec of FY24 and INR 615.5 billion in Jul-Sept.
Among brokerages, Nomura Equity Research forecast the company's profit the highest at INR 39.7 billion while Elara Securities (India) Pvt. Ltd. pegged it the lowest at nearly INR 35 billion. Elara Securities (India) is the most bullish on L&T's revenues, projecting it at INR 670.5 billion and Nuvama Wealth Management Ltd. estimated L&T to clock revenue of INR 641.5 billion. The vast difference in estimates from brokerages is because of their individual understanding of project execution and delivery leading to revenue growth.
According to brokerage Prabhudas Lilladher Pvt. Ltd., L&T's core infrastructure projects vertical, which accounts for 47% of its revenue, is expected to have registered strong revenue growth. JM Financial Institutional Securities Pvt. Ltd. sees robust growth in this segment with order inflows of INR 704 billion, up 17% on year.
However, Nuvama, which also pegged good revenue growth in the infrastructure projects segment, said although government spending and hydrocarbon projects reflected a strong momentum in Oct-Dec, spending by private sector firms to boost their assets is yet to gain desired traction.
L&T, being a contractor company, relies heavily on bagging tenders over infrastructure project development, as well as putting up plants for its client companies. Thus, investors keep a close watch on its ability to bag deals and tenders. Although the firm is perceived to have been extremely successful in bagging new orders, it, along with its Spanish partner Navantia, lost a mega submarine manufacturing deal for the Indian Navy, reportedly for being non-complaint.
Brokerages like Motilal Oswal Financial Services Ltd., which in a report said L&T bagging thermal and defence deals in Oct-Dec has allayed investors' concerns on domestic ordering, are likely to keep a close watch on the order pipeline. As of Sept. 30, L&T's order book was at INR 1,546.7 billion.
In Oct-Dec, L&T announced order intake of INR 235 billion to INR 315 billion, including supply of K9 Vajra-T Artillery Platforms to the Indian Army as well as re-entry into thermal power, with orders for main plan packages for two projects, Prabhudas Lilladher said.
L&T is likely to report earnings before interest, tax, depreciation and amortisation of INR 67.3 billion, according to the average of estimates from eight brokerages. The highest EBITDA of INR 70 billion has been estimated by Nomura, and the lowest of INR 63.6 was estimated by Kotak Institutional Equities.
At the current price, the stock is trading flat after the company announced its September quarter earnings on Oct. 30. Although L&T declared its earnings after trading hours, the stock closed marginally lower at INR 3,408.4. The share price opened higher at INR 3,530, up 3.6% on the next trading day, and closed higher at INR 3,622.3, up 2.6?ter hitting a high of nearly INR 3,655. At 1528 IST, shares of L&T traded 0.4% higher at INR 3,471 on the National Stock Exchange.
Following are the Oct-Dec earnings estimates for L&T based on reports from nine brokerage firms in descending order by the estimate of net profit:
|
Brokerge |
Net sales (in million INR) |
Net profit (in million INR) |
EBITDA (in million INR) |
|
Nomura Equity Research |
6,58,711.00 |
39,667.00 |
70,044.00 |
|
Motilal Oswal Financial Services Ltd |
6,63,515.00 |
37,937.00 |
69,292.00 |
|
HDFC Securities Ltd |
6,61,700.00 |
37,700.00 |
70,000.00 |
|
Kotak Institutional Equities |
6,59,864.00 |
36,928.00 |
63,620.00 |
|
Sharekhan Ltd |
6,61,530.00 |
36,500.00 |
|
|
JM Financial Institutional Securities Pvt Ltd |
6,55,140.00 |
35,728.00 |
67,890.00 |
|
Nuvama Wealth Management Ltd |
6,41,513.00 |
35,707.00 |
66,076.00 |
|
Prabhudas Lilladher Pvt Ltd |
6,54,360.00 |
35,320.00 |
67,104.00 |
|
Elara Securities (India) Pvt Ltd |
6,70,463.00 |
34,975.00 |
64,633.00 |
|
Average |
6,58,532.89 |
36,718.00 |
67,332.38 |
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Subhojit Sarkar
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