L&T Q2 net profit grows 45%; confident of outperforming FY24 guidance

• L&T reports the best ever quarterly order inflow in Q2 at ₹89,153 crore.
• The company says that the prospect pipeline for the next 6-12 months is encouraging.
• L&T’s EBIDTA margins for the infrastructure segment went down by 1.1% YoY on account of input costs.
• Company says that margins will normalise in the subsequent quarters as it closes its pre-Covid legacy projects.
  

Larsen & Toubro’s second quarter net profit went up by 45% to ₹3,223 crore as compared to ₹2,229 crore in the same quarter last year. Its revenue from operations grew 19% to ₹51,024 crore in Q2 FY24 as compared to ₹42,763 crore in Q2 FY23, the company said on Tuesday.

The construction major also reported its best ever quarterly order inflow in Q2 at ₹89,153 crore across segments — registering a 72% YoY growth.

“During the quarter, we have received the highest ever order inflows in the history of the company. The company now tops the list of international EPC (engineering procurement and construction) contractors working in the MENA region in terms of value for projects under execution,” said S N Subrahmanyan, CMD of L&T.

‘To outperform FY24 guidance’

R Shankar Raman, CFO of L&T added that the prospect pipeline for the next 6-12 months is also encouraging. “It’s likely that we will outperform the order inflow and revenue guidance for FY24 depends on H1 performance,” he said in a media conference call.

At the beginning of the financial year, it guided for 10-12% growth in order intake for FY24, and revenue growth of 12-15%. Its consolidated order book stands at ₹4.5 lakh crore as on September 30, 2023, with international orders having a share of 35%.

A large chunk of second quarter’s order inflows are from the Middle East, particularly Saudi Arabia. Two-thirds of Q2’s order wins are from the international markets. And, 80% of its international orders are from the Middle East, particularly Saudi Arabia.

But the company does not expect the ongoing conflict between Israel and Hamas to significantly disrupt the execution or derail the progress of its projects.

“We have just turned a corner in supply chain constraints seen during Covid and getting back to normalcy. While it’s incorrect to take the risk off the table, it’s not making us lose sleep,” said Raman.

Margins will normalise

The company’s earnings before interest tax depreciation and amortization (EBIDTA) grew 15% for the quarter. However its EBIDTA margins went down to 11% from 11.4% on a year on a year basis.

The EBITDA margin of its key infrastructure segment went down by 1.1% YoY to 5.4% in Q2. This margin squeeze is due to input costs rise seen for pre-Covid legacy contracts.

“The margins for the infrastructure segment will be more normalized in the subsequent quarters considering these projects are nearing completion,” said Raman.