L&T Q4 net profit rises 10% to ₹3,987 crore, cautiously optimistic about FY24

• L&T’s Q4 consolidated net profit rose 10% YoY to ₹3,987 crore, as its revenues grew 10.4% YoY to ₹58,335 crore.
  
• L&T’s top and bottom line both missed analyst expectations, and its order inflows grew 3% YoY due to a slowdown in infrastructure business.
  
• In FY24, the company says it expects its order book to grow between 10-12%, while the topline is expected to grow between 12-15%.
  
• AM Naik will step down as the company’s chairman on September 30, and SN Subrahmanyan will become the CMD.
  

Construction and engineering behemoth Larsen & Toubro (L&T) on Wednesday reported a consolidated net profit of ₹3,987 crore in Q4, rising 10% over the same quarter last year. Its net profit missed analyst estimates of ₹4,339 crore.

Its revenue for the quarter rose 10.4% YoY to ₹58,335 crore, once again lower than analyst estimates of ₹59,256 crore.

For the full FY23, L&T’s net profit came in at ₹10,471 crore, registering a growth of 21%, while its revenue grew 17% to ₹1.83 lakh crore.

The company said that its performance was boosted by strong execution of infrastructure projects as well as robust momentum in the information technology and technology services segment.

International revenues constituted 39% of the company’s topline during the quarter, increasing from 33% a year ago.

The company’s earnings before interest, taxes, depreciation and amortisation (EBITDA) margin also expanded to 12.3% in Q4 from 11.7% a year ago.

For the full year of FY23, L&T’s EBITDA margins shrunk to 11.3% from 11.6% in FY22. The company’s chief financial officer R Shankar Raman blamed it on elevated input materials inflation.

“We did an internal assessment and with the way projects are lined up, we expect a 10-12% improvement in the order book in FY24, while revenue growth is expected to be between 12-15%,” Raman said during a post-earnings call, adding that the upcoming general elections in 2024 could have an impact on its orders.

The company declared a final dividend of ₹24. It also announced that AM Naik will step down as the company’s chairman on September 30, and SN Subrahmanyan will be the chairman and managing director.

L&T is banking on improved tax collections to support its capex-led growth

Despite Q4 being a traditionally strong quarter, L&T reported only a marginal uptick of 3% YoY in its order inflows during Q4 – at the group level, the conglomerate received orders worth ₹76,099 crore, of which international orders constituted 47%, or ₹36,046 crore.

“Going forward, improved tax collections for the government will support its capex led growth aspiration,” the company said.

The company’s consolidated order book stood at ₹3.99 lakh crore at the end of Q4, with the share of international orders at 28%.

“While the impact [of global crises] appears to have been contained, these uncertainties continue to undermine the confidence among consumers and businesses to spend, thereby impacting global growth,” L&T said.

Unlike in Q3 when L&T sounded optimistic about the growth outlook, it struck a note of cautious optimism this time around. “In this backdrop, the company will focus with cautious optimism on large project wins, timely execution of its large order book, growth of its services portfolio in the stated glide path and preservation of liquidity and optimum use of capital and other resources,” it said.

Infrastructure segment sees a slowdown

Infrastructure segment contributed to over half of its order inflows in Q4, at ₹41,187 crore. But the order inflows also registered a decline of 9% when compared to the same period last year.

Added to that, the EBITDA margins of the infrastructure segment contracted to 7% in Q4 from 8.2% in the same period last year.

Raman maintained that the softness in this segment’s margins is due to the inflationary pressures, but noted that much of the contracts of the company have cost variation clauses built-in, which should help it relieve the inflationary pressures to an extent.

On the other hand, the IT & technology services segment reported a growth of 21% YoY to ₹10,645 crore. However, EBITDA margins contracted considerably here too, to 20.7% in Q4, compared to 23.3% a year ago.

“The segment margin was impacted mainly due to one-time merger integration expenses in LTIMindtree and elevated employee costs,” the company said, explaining the sharp decline in this segment’s margin during the quarter, noting that 93% of the segment revenue was from international markets.

L&T’s energy projects segment registered a growth of 17% YoY to ₹8,892 crore during Q4 thanks to multiple international orders in the hydrocarbon business.

L&T’s Q4 and FY23 in numbers:


Source: Company reports

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