Larsen and Toubro Ltd.'s first quarter net profit beat analysts' estimates due to better project execution across segments.
The construction firm's profit rose 46.5% to Rs 2,493 crore in the April-June quarter in comparison with Rs 1,702 crore during the same period last year, according to an exchange filing on Tuesday. This compares with the Rs 2,128 crore consensus estimate of analysts tracked by Bloomberg.
The earnings were primarily aided by the execution of a healthy order book in its projects and manufacturing portfolio. International revenue during the quarter, at Rs 19,022 crore, constituted 40% of the total revenue, it said.
The company approved a share buyback plan of up to Rs 10,000 crore at up to Rs 3,000 apiece and proposed a special dividend of Rs 6 per share.
SN Subrahmanyan, chief executive officer and managing director at Larsen & Toubro, said that the capex buoyancy in India and Gulf Cooperation Council is providing the much-needed tailwinds for growth in projects and manufacturing portfolio.
The Q1 FY24 performance is on the back of robust top line and bottom line growth, supported by balance sheet management, resulting in improved return ratios, he said.
"We are walking the talk by returning surplus cash to shareholders in our journey to improve the group return ratios over the Lakshya Strategic Plan period ending FY26," Subrahmanyan said. The group’s focus continues to be on cash generation, planned capital allocation and on enhancing shareholder wealth, he said.
L&T Q1 FY24 Highlights (Consolidated, YoY)
Revenue from operations rose 33.5% to Rs 47,882.4 crore, as against a Bloomberg estimate of Rs 41,056.8 crore.
Operating profit, or Ebitda, rose 23% to Rs 4,868.6 crore, as compared with a Bloomberg estimate of Rs 4,490.5 crore.
Operating margin stood at 10.1% versus 11.03% a year ago.
Order Book
Order inflows at the group level rose 57% year-on-year to Rs 65,520 crore in the April-June quarter. The orders were registered across rail, renewables, rural water supply, transmission and distribution, IT and office space, and the onshore and offshore verticals of the hydrocarbon business, the company said.
International orders at Rs 27,646 crore during the quarter constitutes 42% of the total order inflows.
As of June-end, the consolidated order book of the group was Rs 4,12,648 crore. International orders constituted 29% of the total order book.
Margin Recovery Expected In Q4 FY24
L&T's operating margin have dropped consistently for the last five quarters. In Q4 FY23, the company reported operating margin of 8.6%. In Q1 FY23, although it increased to 10.1% on a sequential basis, it's lower by 93 basis points year-on-year.
The company in Q4 FY23 guided that it expects the margin to start recovering from Q4 FY24 on account of increased mix of margin-accretive projects in the total projects that get executed.
"We maintain that guidance basis the mix of projects that are margin-accretive and ones that have made progress but are not margin-accretive," R Shankar Raman, group chief financial officer of L&T, said in a media conference call.
During Covid-19, one year got wasted in maintaining the project sites which ate into the margin, he said.
"We expect the improvement in the trajectory of margins to be visible from the fourth quarter of this fiscal. And expect fiscal 2025 to be a lot healthier from what it is at present," Raman said.
The company expects the revenue growth to be sustained on account of order inflows from both international and domestic businesses.
There is a strong visibility of order inflows as 10 trillion rupees worth of projects are expected to be tendered globally in the next few quarters, Raman said.
Shares of L&T closed 1.54% lower at Rs 2,565 apiece before the results were announced, as compared with a 0.04% advance in the benchmark NSE Nifty 50.
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