L&T Q3 Results Review - Orderbook Position Strong But Margins Subdued: Centrum Broking

Centrum Broking Report

Larsen & Toubro Ltd.'s reported marginally weak set of results for Q3 FY24 as revenue came in 5% ahead of our expectations while margins were 90bps lower and profit after tax 10% below estimate. Order inflow and order backlog remains strong with strong contribution from international segment.

However, margin recovery in core engineering, procurement and construction business remained weak. Larsen & Toubro has upped its order inflow and revenue growth guidance whereas margins guidance in P&M segment has been marginally reduced.

Overall order inflow trend remained strong with 32% YoY growth in order inflow in P&M segment driven by large orders in infrastructure and hydrocarbon segment. 67% of incremental new orders were received from international segment.

International orders now constitute 39% of total orderbook and Saudi represents almost 1/3rd of total orderbook of the company thereby increasing geographic concentration risk.

We have maintained our estimates and 'Add' rating on the stock and believe that execution is expected to remain strong with favourable tailwinds from domestic government capex and strong outlook on middle east economy.

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