Larsen & Toubro Ltd. shares declined 4.22% on Wednesday, a day after the company reported better than estimated earnings in the third quarter of fiscal 2024.
The stock had returns of between 4.37% and 24% in the last seven consecutive quarters, after the results were announced. There have been two instances where the stock rebounded after tumbling on the day its quarterly earnings were reported.
It was only in Q4 FY22 that the stock gave a negative return of 19.6%. Even in the quarter prior to Q2, the stock had given a positive return of 6.71%, according to data under review.
Here's a look at the stock performance in the last nine quarters:
The reasons for the stellar performance of the stock could be attributed to L&T's robust order book position at Rs 4.7 lakh crore and the order pipeline of Rs 6.27 lakh crore that provides the company with long-term revenue visibility.
The company has around 39% of its order book from international projects—around 90% coming from the Middle East—although these projects are not very high margin but safe in terms of investment and revenue guarantee.
Also, the margin pressure the company faced after the Covid-19 pandemic has shown sequential recovery in the last three quarters. The management has guided that the legacy orders dating back to the Covid period will most likely get exhausted in FY25, taking the margin to pre-Covid levels. This will also have a positive impact on the profitability of the company.
Q3 Earnings Beat Despite Stress On Margin
The net profit of the construction-to-technology conglomerate rose 17.24% to Rs 3,594 crore in the third quarter, beating analyst estimates on the back of strong order execution in the projects and manufacturing segments.
L&T Q3 FY24 Highlights (Consolidated, YoY)
Revenue from operations rose 18.83% to Rs 55,127.8 crore (Bloomberg estimate: Rs 53,571 crore).
Ebitda, or operating profit, increased 13.52% to Rs 5,759 crore (Bloomberg estimate: Rs 5,984.7 crore).
Ebitda margin fell 48 bps to 10.44% vs 10.93 a year ago (Bloomberg estimate: 11.2%).
Net profit surged 17.24% to Rs 3,594.51 crore (Bloomberg estimate: Rs 3,245.7 crore).
In the near term, the fourth quarter of FY24 and the first quarter of FY25 are likely to be subdued in terms of high-margin domestic order inflows, on account of general elections in April-May 2024. This could have a slight impact on the earnings, but analysts have already factored it in their full-year estimates.
L&T Shares closed 4.22% lower on Wednesday, compared with 0.86% gain in the benchmark Sensex.
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