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Informist, Thursday, Jan. 30, 2025

 

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--L&T: India economic slowdown possibly bottomed out now
--CONTEXT: L&T management's comments in post-earnings analyst concall
--L&T: Indian economy growth momentum waned a bit in recent quarters
--L&T: Domestic order book INR 3.27 trillion as on Dec 31
--L&T: Private sector forms 20% of domestic order book as on Dec 31
--L&T: PSUs made for 39% of domestic order book as on Dec 31
--L&T: Hi-tech manufacturing order prospects pipeline INR 65 bln Jan-Mar
--L&T: Expect to surpass FY25 guidance of order inflow growth of 10%
--L&T: FY25 EBITDA margin guidance unchanged at around 8.2%
--L&T: Isolated domestic infra project cases saw delayed payments Oct-Dec
--L&T: Infra vertical margins soft last 2-3 yrs, see some improvement ahead
--L&T: 25% of near-term domestic order prospects from private sector
--L&T: 75% of near-term domestic order prospects from public sector
--L&T: See FY25 EBITDA margin 8.2%
 

 

By Rajesh Gajra

 

NEW DELHI – Larsen & Toubro Ltd. expects to surpass the 10% order inflow growth guidance for 2024-25 (Apr-Mar) on the back of the order inflow of INR 2.670 trillion in the first nine months and a strong order inflow prospects pipeline of INR 5.51 trillion in Jan-Mar or the near term, according to the company's management. Speaking with analysts and investors in a post-earnings conference call on Thursday, L&T's management said that with domestic ordering momentum expected to pick up in Jan-Mar and the international prospects pipeline also remaining steady, the company was confident of exceeding the guidance on order inflow.

 

For Apr-Dec, the consolidated order inflow was INR 2.670 trillion, up 16% from the same period in the previous year. Of this, INR 1.447 trillion were international orders, up from INR 1.379 trillion in the year-ago period. Domestic order inflow in Apr-Dec was INR 1.223 trillion compared to INR 928 billion in the same period of the previous year.

 

In the December quarter, the consolidated order inflow jumped 53% on year to INR 1.160 trillion, the highest ever in a quarter for the company. Of this, 53% was from international orders, which rose 24% on year to INR 621 billion, while domestic order inflow more than doubled to INR 539 billion from INR 254 billion in the year-ago quarter.

 

Of the company's consolidated order book of INR 5.642 trillion as on Dec. 31, domestic orders made up for 58% or INR 3.260 trillion, while the balance 42% were international orders. Giving a breakdown of the domestic order book of INR 3.260 trillion, the management told analysts and investors that 15% of the order book was from central government orders, and 26% was from state government. The domestic order book share of public sector corporations or state-owned enterprises was 39%, and that of private sector companies was 20%, the management said.

 

There is likely to be an improvement in government capital expenditure from Jan-Mar, the management said. The domestic economic growth momentum has waned in recent quarters, and the slowdown in the economy has possibly bottomed out, the management said.

 

Of the order inflow prospects pipeline of INR 5.51 trillion projected by the company for Jan-Mar or near-term, the share of infrastructure orders would be around INR 4 trillion, and of the infrastructure orders "a major part is coming out in domestic itself," L&T's management said. Of the domestic infrastructure order prospects, 75% will likely be public sector and 25% private sector, the management said.

 

In response to an analyst's query on moderate revenue growth in the domestic infrastructure business the company said "there have been some isolated cases where we had to bring down the executions because of delayed payments, but otherwise the execution momentum was in line...with our guidance." On the infrastructure vertical's sustained margin contraction, L&T's management said that the margins in this vertical have been a "little softer in the last 2-3 years." As the older orders prior to FY23 gets fully executed, and new set of orders get into execution stages, "we do expect some improvement in margins," the management said.

 

Talking of its hi-tech manufacturing segment, the management said that the order prospects pipeline for Jan-Mar for this segment is around INR 65 billion, amid strong execution momentum continuing in the precision engineering business.

 

On the margins front, L&T's management said it was on track to meet the EBITDA margin guidance of 8.2% for FY25 from its core projects and manufacturing business. In the first three quarters of the current financial year, the EBITDA margin in this core business was 7.6%, "which means that the Q4 (Jan-Mar) run rate for EBITDA margin is going to be very high, and that has been baked into our plan," the management said.

 

In the December quarter, L&T's consolidated revenue rose 17.3% on year and 5.1% sequentially to INR 646.68 billion, while the consolidated net profit attributable to owners of the company rose 14% on year and declined 1.1% sequentially to INR 33.59 billion.

 

On Thursday, shares of L&T ended 0.8% lower at INR 3,420.95 on the NSE.  End

 

Edited by Avishek Dutta

 

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