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Informist, Monday, Jul. 28, 2025

 

By Avishek Rakshit

 

KOLKATA – A slowdown in capital expenditure by the private sector, along with lack of major new government project announcements, is expected to have kept domestic engineering, procurement, and construction companies under some pressure during the June quarter. However, companies like Larsen & Toubro Ltd., with diversified exposure across sectors and countries, may continue to perform well despite these challenging conditions.

 

As a result, Larsen & Toubro is likely to report year-on-year growth in both revenue and profits for the June quarter, driven by project completions. The slower pace of new projects in the past few quarters could affect the company's financial performance when compared with the trailing quarter.

 

L&T is expected to report a 36% on-year increase in its consolidated net profit for the June quarter, reaching INR 37.9 billion, along with a 14% on-year rise in consolidated revenue to INR 630.7 billion, according to the average of estimates from nine brokerages. This suggests a 31% sequential decline in profit and a 15% sequential fall in revenue. L&T is set to announce its financial results for the June quarter on Tuesday.

 

JM Financial Institutional Securities Pvt. Ltd. has the highest net profit estimate for L&T at over INR 64 billion while Nuvama Wealth Management Ltd. expects the lowest net profit at nearly INR 33 billion. Kotak Institutional Equities, which has the highest revenue estimate, forecasts it to reach around INR 644 billion while Motilal Oswal Financial Services Ltd. predicts the lowest revenue at nearly INR 618 billion.

 

JM Financial is an outlier among the brokerages estimating L&T's profit. It stands out among the brokerages with its significantly higher profit estimate compared to others.

 

The country's largest engineering, procurement, and construction company had reported a consolidated net profit of INR 27.9 billion for the June quarter of 2024-25 (Apr-Mar) and nearly INR 55 billion in Jan-Mar. Its consolidated revenues were INR 551.2 billion in the year-ago quarter and INR 743.9 billion in the March quarter.

 

Despite the weak domestic market, Kotak Institutional Equities expects L&T to report a 19% on-year growth in its engineering, procurement, and construction business. The company believes that overseas orders will more than offset the tepid market conditions in India. Execution of orders in India, which will help the company earn revenue and profit, is expected to be mostly from the government-led infrastructure and energy verticals.

 

Although L&T does not publicly disclose its revenues from engineering, procurement, and construction projects, the infrastructure and energy sectors together account for nearly 70% of its annual top line and 46% of its pre-tax profits. Most of the company's business arising from engineering, procurement, and construction projects come from the infrastructure and energy business verticals. The rest of the revenue and profit comes from manufacturing, information technology services, financial services, and development projects. Hence, the company's performance in infrastructure and energy projects is a key determinant of its financial performance.

 

Nomura Equity Research said the June quarter reflects a cautious corporate India, with companies hesitating to undertake new capital expenditures due to challenging economic environment marked by weak demand and global uncertainties. However, there was a strong rise in orders from the power, defence electronics, and buildings, and factory sectors, signalling some resilience in these areas.

 

Nomura noted although new capital investment announcements in the June quarter by Indian companies were up 42% on year at INR 3.6 trillion, this is attributable to a low base effect as investment plans by Indian companies had hit a 14-quarter low of INR 2.9 trillion in the June quarter of FY25. Nomura expects L&T's core order inflows to have declined by 27% on year at INR 397 billion during Apr-Jun.

 

L&T is expected to report an earnings before interest, tax, depreciation, and amortisation of INR 67.6 billion for the June quarter, according to the average of estimates from eight brokerages. The highest EBITDA estimate of INR 93.2 billion is from JM Financial and the lowest of INR 61 billion is from Motilal Oswal.

 

Kotak Institutional Equities expects L&T's EBITDA margin from its core engineering and construction business to improve to 8% in the reporting quarter, up from 7.6% in the same quarter last year. This increase is primarily driven by a larger share of project executions in the hydrocarbon segment. However, the brokerage cautioned that the execution of mega-hydrocarbon projects secured by L&T in FY25 might not be margin accretive at segment level.

 

As L&T declares its financial results, analysts will be closely watching the company's outlook and commentary on international orders amid global uncertainties, as well as their views on capital expenditure by other Indian companies and the pace of order execution.

 

At 0928 IST on Monday, shares of L&T were 0.3% down at INR 3,433 on the National Stock Exchange.

 

Of the 14 brokerage reports on the company available with Informist, 13 have a ‘buy' rating at an average target price of INR 4,141 and one has a 'hold' rating.

 

Following are the Apr-Jun earnings estimates for L&T based on reports from nine brokerages in descending order of the estimate of net profit: 

 

Broker Name	Net sales (in million rupees)	Net profit (in million rupees)	EBITDA (in million rupees)
JM Financial Institutional Securities Pvt Ltd	6,26,822.00	64,010.00	93,230.00
Sharekhan Ltd	6,28,370.00	37,700.00
Antique Stock Broking Ltd	6,20,817.00	34,819.00	63,826.00
HDFC Securities Ltd	6,33,900.00	34,700.00	64,600.00
Nomura Equity Research	6,39,618.00	34,481.00	63,721.00
Prabhudas Lilladher Pvt Ltd	6,33,423.00	34,371.00	65,212.00
Motilal Oswal Financial Services Ltd	6,18,000.00	34,000.00	61,000.00
Kotak Institutional Equities	6,43,992.00	33,723.00	64,245.00
Nuvama Wealth Management Ltd	6,31,019.00	32,999.00	64,995.00
Average	6,30,662.33	37,867.00	67,603.63

 

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Subhojit Sarkar

 

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