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Larsen & Toubro Limited — Q2 FY24
L&T reported a robust Q2 FY24 with group revenue of ₹51,000 crore (+19% YoY) and PAT of ₹3,200 crore (+45% YoY), driven by strong execution in projects & manufacturing and a one-time gain from Hyderabad Metro TOD monetization.
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L&T reported a robust Q2 FY24 with group revenue of ₹51,000 crore (+19% YoY) and PAT of ₹3,200 crore (+45% YoY), driven by strong execution in projects & manufacturing and a one-time gain from Hyderabad Metro TOD monetization. Order inflows surged 72% YoY to ₹892 billion, led by two ultra-mega hydrocarbon orders in the Middle East. The order book reached a record ₹4.5 trillion (+22% YoY). However, EBITDA margin contracted 40bps to 11% due to legacy EPC job pressures. Management revised FY24 P&M margin guidance down to 8.5%-9% (from 9%) due to delayed margin recognition on new jobs, but expects outperformance on revenue and order inflow guidance. Key risk: geopolitical tensions in the Middle East could disrupt the robust international order pipeline.
L&T ने दूसरी तिमाही में अच्छा प्रदर्शन किया। कंपनी की कुल कमाई ₹51,000 करोड़ रही, जो पिछले साल से 19% ज्यादा है। मुनाफा ₹3,200 करोड़ रहा, जो 45% बढ़ा। यह बढ़ोतरी प्रोजेक्ट्स और मैन्युफैक्चरिंग में अच्छे काम और हैदराबाद मेट्रो से एक बार की कमाई के कारण हुई। नए ऑर्डर 72% बढ़कर ₹8,92,000 करोड़ हो गए, खासकर मिडिल ईस्ट से दो बड़े तेल-गैस ऑर्डर मिले। कुल ऑर्डर बुक ₹4.5 लाख करोड़ के रिकॉर्ड स्तर पर पहुंच गया। हालांकि, पुराने ठेकों के दबाव से EBITDA मार्जिन 11% रहा, जो थोड़ा कम है। कंपनी ने मार्जिन अनुमान घटा दिया, लेकिन कमाई और ऑर्डर में बेहतर प्रदर्शन की उम्मीद है। खतरा: मिडिल ईस्ट में तनाव से अंतरराष्ट्रीय ऑर्डर प्रभावित हो सकते हैं।
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Geopolitical tensions in the Middle East
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Order Inflow
₹892 billion
+72% YoY
Highest ever quarterly order inflow, driven by two ultra-mega hydrocarbon orders in the Middle East.
Order Book
₹4.5 trillion
+22% YoY
Record order book, with 65% domestic and 35% international; 84% of international from Saudi Arabia.
Prospects Pipeline
₹8.8 trillion
+39% YoY
Near-term prospects pipeline increased sharply, led by hydrocarbon prospects (₹2.9 trillion).
NWC to Sales Ratio
16.7%
-310bps YoY
Improved working capital management, driven by better collections and lower gross working capital.
What Changed vs Last Quarter
NEW
Order inflow and revenue to outperform initial guidance
Management expects to exceed the initial FY24 guidance of 10-12% order inflow growth and 12-15% revenue growth, but keeps guidance open-ended due to geopolitical uncertainties.
NEW
P&M margin guidance revised to 8.5%-9%
Projects & manufacturing EBITDA margin for FY24 is now expected in the range of 8.5%-9%, down from the initial 9% guidance, due to delayed margin recognition on new jobs.
NEW
Margin trajectory to improve from FY25
Management expects margins in the projects & manufacturing portfolio to improve from the next financial year onwards, as legacy jobs conclude and new jobs ramp up.
UPDATED
NWC to sales ratio guidance unchanged at 16%-18%
Net working capital to revenue ratio for FY24 is expected to remain in the 16%-18% range, supported by continued focus on collections.
DROPPED
Order inflow growth of 10-12% for FY24
Management maintained guidance for 10-12% order inflow growth for the full year, despite strong Q1 performance.
DROPPED
Revenue growth of 12-15% for FY24
Revenue growth guidance maintained at 12-15% for FY24, with Q1 revenue growth of 34% providing a strong start.
DROPPED
Projects & manufacturing EBITDA margin of 9% for FY24
Full-year EBITDA margin guidance for projects and manufacturing segment remains at 9%, with first half expected to be subdued due to legacy projects.
NEW RISK
Geopolitical tensions in the Middle East
The ongoing conflict in the Middle East could disrupt oil prices and project awards, impacting L&T's large international order pipeline (84% of international order book in Saudi Arabia).
NEW RISK
Margin pressure from legacy EPC jobs
Legacy COVID-impacted jobs are compressing infrastructure margins (5.4% in Q2 vs 6.6% YoY). Management expects these to conclude by FY24 end, but any delay could further pressure margins.
NEW RISK
Execution risk on ultra-mega orders
Analysts questioned the margin profile of the two ultra-mega hydrocarbon orders. Management acknowledged they are fixed-price contracts and declined to provide margin expectations, raising uncertainty.
NEW RISK
Labor availability for specialized projects
While management downplayed current labor shortages, they admitted that securing skilled labor for complex projects (coastal roads, high-speed rail, underground metro) is becoming challenging.
RISK GONE
Legacy COVID-impacted projects weighing on margins
Subdued EBITDA margins in Q1 due to legacy EPC projects from pre-COVID era; management expects completion by Q2/Q3 FY24.
RISK GONE
Execution capacity constraints in infrastructure
Analyst raised concern about potential shortage of equipment and capacity constraints given the large order book; management downplayed the risk.
RISK GONE
Dependence on Middle East hydrocarbon prospects
Sharp increase in hydrocarbon prospects pipeline (INR 3.47 trillion) is concentrated in Middle East; any geopolitical or oil price shock could impact conversion.
RISK GONE
Timing of IDPL divestment and Hyderabad Metro support
IDPL stake sale may slip to Q3; metro government assistance of INR 450 crore expected but not yet received.
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Guidance and risk preview
Management expects to exceed the initial FY24 guidance of 10-12% order inflow growth and 12-15% revenue growth, but keeps guidance open-ended due t...
The ongoing conflict in the Middle East could disrupt oil prices and project awards, impacting L&T's large international order pipeline (84% of int...
View Risks →