L&T Q3 Preview: Profit May Rise On Order Inflow, Project Execution
Net profit for the engineering and construction conglomerate is expected to increase 33.7% year-on-year to Rs 3,245 crore in the quarter ended December.
Larsen & Toubro Ltd.’s net profit in the third quarter of fiscal 2024 is seen rising on the back of strong order inflows and project executions. However, operating profit and margin are likely to be subdued.
Net profit for the engineering and construction conglomerate is expected to increase 33.7% year-on-year to Rs 3,245 crore in the quarter ended December, according to a consensus estimate of analysts tracked by Bloomberg.
The operating profit and operating margin are expected to fall year-on-year on account of low-margin legacy projects from the Covid-19 period, which are expected to be exhausted fully by FY25.
L&T Q3 FY24 Preview (Consolidated, YoY)
Revenue from operations seen rising 15.5% to Rs 53,571 crore vs Rs 46,389.7 crore over the same period last year.
Ebitda expected to decline 11.3% to Rs 5,984.7 crore vs Rs 6,745.4 crore in the year-ago period.
Ebitda margin estimated to contract 330 bps to 11.2% vs 14.5% a year ago.
Net profit seen rising 33.7% to Rs 3,245.7 crore vs Rs 2,426.9 crore, up 33.7%.
According to brokerage firm Citi Research, L&T has continued to exhibit "strong" execution capabilities in its core plant and machinery business, which is assured by big order wins in India as well as the Middle East. The construction giant also has "decadal best working capital and cash flow", the brokerage said.
Citi has raised its target price on the stock to Rs 4,082 from Rs 3,547 earlier.
It projects order inflows of over Rs 50,000 crore in L&T's plant and machinery business, which is more than 10% year-on-year growth on a strong base. The margin is also expected to show signs of bottoming out in the third quarter, subsequently raising hopes for recovery, it said.
The brokerage also cautioned about some "upside risks" to order inflows, which are expected to be taken positively by the market.
L&T's management expects legacy projects to be significantly exhausted by Q4 FY24, while incremental execution of large projects would help to achieve margin threshold from FY25.
"Margin recovery for the infrastructure remains a key monitorable," Yes Securities said in a report earlier.
“With the order pipeline getting significantly boosted both on domestic and exports front, there is significantly increased visibility for order inflow growth in the near-term. The company is well-placed to capture incremental business from Middle East from energy as well as other infrastructure segments,” Yes Securities said.
“We remain positive on the company’s strong business model, robust bid pipeline, diversified order book and healthy balance sheet,” it said.
Key Monitorables
Update on 9M FY24 progress on full-year order and revenue guidance that L&T expects to exceed.
Domestic vs iInternational order book composition and trend.
Progress on monetisation of Hyderabad Metro and Nabha power plant.
Margin recovery for the infrastructure business.
