REPORTS DECENT EXECUTION WITH STRONG ORDER INFLOWS - LARSEN & TOUBRO LATEST QUARTERLY RESULT

Larsen & Toubro – Q3FY23 First Cut

(CMP: Rs 2122.05, Mcap: Rs 298225 crore)

Larsen & Toubro (L&T) reported decent execution with strong order inflows for the quarter. Order inflows came at Rs 60710 crore, up 21% YoY. Orders were received across multiple segments like Oil & Gas, Public Spaces, Hydel & Tunnels, Irrigation systems, Ferrous Metals and Power Transmission & Distribution. International orders at Rs 15,294 crore during the quarter comprised 25% of the total order inflow. Standalone EBITDA margins came in at 8.3%.

Q3FY23 Earnings Summary

L&T’s adjusted Standalone revenues (Ex- E&A) for the quarter grew by 8.3% YoY to Rs 27785.4 crore (vs. our estimate of Rs 29226.7 crore). On standalone basis, Infrastructure segment revenue grew by 13.8% to Rs 20294 crore on YoY basis driven by a smooth execution of a large order book. Energy segment revenue came at Rs 4928.2 crores de-grew by 9.7% YoY basis. Hi-Tech manufacturing segment posted revenue of Rs 1863.1 crores and grew by 20.3% YoY basis with accelerated progress in few jobs. Others segment reported a growth of 6.3% YoY to Rs1078.7 crores, primarily due to lower pace of execution in the SWC business

On a consolidated basis, adjusted revenues grew by 17% to Rs 46390 crore YoY basis aided by improved execution in the Infrastructure projects segment and continued growth momentum in the IT&TS portfolio. On consolidated basis, IT & Technology services segment posted revenues of  Rs 10517 crores grew by 25% YoY. Financial service segment revenue grew by 13% at Rs 3349 crores. While development project segment registered a growth in revenue by 13% YoY to Rs 1106 crores driven by a higher PLF in the Nabha Power plant and increase in ridership in Hyderabad Metro

For Q3FY23, L&T registered strong order inflows at group level worth Rs 60710 crore, which grew by 21% YoY. orders were received across multiple segments like Oil & Gas, Public Spaces, Hydel & Tunnels, Irrigation systems, Ferrous Metals and Power Transmission & Distribution. International orders at Rs 15,294 crore during the quarter comprised 25% of the total order inflow. Overall infrastructure segment secured orders worth Rs 32530 crore (~53.5% of total inflows). L&T’s order backlog as on Q3FY23 stood at Rs 3,86,588 crore with international orders contributing 26%

During the quarter, Standalone EBITDA margins improved marginally by 16bps to 8.3% (Vs. our estimates of 8.3%) on YoY basis. On a consolidated basis, EBITDA margins came in at 10.9%

Consequently, for Q3FY23, standalone adjusted PAT (Ex-E&A) came in at Rs 1825.4 crore, flat on YoY (Vs. our estimates of Rs 2032.2 crore). Other income came in at Rs 833 crore de-grew by 9.8% on YoY while, interest expense increased by 22.5% to Rs 508 crore. The consolidated Adj. PAT for Q3FY23 came in at Rs 2553 crore (Vs Rs 2054.7 crore in Q3FY22)

View: L&T remains the best way to play the capex recovery theme in India given its strong execution capability, presence across diverse sectors and geographies which makes its less vulnerable during down cycles. Focus on monetisation of non-core assets, enhancing ROE’s and reducing debt makes it an attractive portfolio bet to ride the infrastructure and manufacturing cycle revival theme.

Impact: Positive