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    Larsen & Toubro Limited

    LT
    Construction·30 Oct 2024
    Management Summary

    Larsen & Toubro reported a robust Q2 FY25 with strong revenue growth and improved profitability, driven by execution momentum in Projects and Manufacturing. The company's order book surpassed ₹5 trillion, supported by significant international orders, particularly in Infrastructure. While overall order inflows saw a slight Y-o-Y decline due to a high base, management remains optimistic about domestic ordering in H2 FY25 and maintains its full-year guidance across key financial metrics. Strategic initiatives in renewable energy, semiconductor design, and data centers are progressing, positioning L&T for future growth.

    Highlights

    8

    • Group revenues for Q2 FY25 stood at ₹616 billion, registering a strong Y-o-Y growth of 21%.

    • Consolidated PAT for Q2 FY25 was ₹34 billion, up 5% Y-o-Y (25% growth excluding non-recurring TOD monetization gain of ₹5.12 billion in Q2 FY24).

    • Group order inflows for Q2 FY25 were ₹800 billion, showing a sequential growth of 13% but a Y-o-Y decline of 10% due to a high base in the previous year.

    • The order book crossed a new milestone of ₹5.1 trillion as of September '24, up 13% Y-o-Y.

    • Net Working Capital to Revenue improved to 12.2% as of September '24, an improvement of 170 basis points sequentially and from 16.7% in September '23.

    • Cash flow from operations for Q2 FY25 more than doubled to ₹77 billion from ₹35 billion in Q2 FY24.

    • Trailing 12 months ROE for Q2 FY25 improved to 16.1%, up 140 basis points Y-o-Y and 80 basis points sequentially.

    • Infrastructure segment order inflows grew robustly by 77% Y-o-Y to ₹495 billion in Q2 FY25, with 63% from international orders.

    What Changed1

    vs Q3 FY25

    Guidance items10 → 12 (+2)

    Guidance & targets

    12
    CategoryTargetPriority
    Capacity
    Electrolyser Manufacturing Capacity
    500 megawatts
    		High
    Capacity
    Electrolyser Manufacturing Capacity
    1 gigawatts
    		High
    Capacity
    Chennai Data Center Capacity
    30 MW
    		High
    Order Inflow
    Realty Development Order Inflows
    ₹8,000 crores
    		High
    Order Inflow
    Group Order Inflows Growth
    10%
    		High
    Order Inflow
    Total Order Inflow
    ₹3,30,000 crores
    		High
    Order Inflow
    BTG Orders (Thermal Power)
    at least 4 gigawatt
    		Medium
    Revenue
    Realty Development Revenues
    ₹5,000 crore
    		High
    Revenue
    Group Revenues Growth
    15%
    		High
    Growth
    Realty Development Order Inflow and Revenue Growth (from FY26 exit trajectory)
    three to four times growth
    		Medium
    Margin
    Projects and Manufacturing Portfolio Margins
    8.2% to 8.25%
    		High
    Working Capital
    Net Working Capital to Revenue
    around 15%
    		High
    2 min read

    Detailed Narrative

    Larsen & Toubro delivered a robust financial performance in Q2 FY25, with group revenues reaching ₹616 billion, marking a strong 21% year-on-year growth. This was primarily fueled by significant execution momentum across the Projects and Manufacturing portfolio, which saw its revenue increase by 28% to ₹445 billion. The consolidated PAT for the quarter stood at ₹34 billion, a 5% increase over Q2 FY24. Excluding a non-recurring📎 Transit Oriented Development (TOD) monetization gain of ₹5.12 billion in the previous year, the PAT growth was a more substantial 25%. The group's EBITDA margin (excluding other income) was 10.3%, while the Projects and Manufacturing business achieved a 7.6% margin, up 20 basis points from the prior year.

    Order inflows for Q2 FY25 were ₹800 billion, reflecting a 13% sequential growth, though a 10% year-on-year decline due to a high base from ultra-mega international orders in the previous year. Despite this, the company's order book reached a new milestone of ₹5.1 trillion as of September '24, growing 13% year-on-year. The domestic order book constitutes 60% (₹3.05 trillion) and international 40% (₹2.05 trillion), with 85% of international orders originating from the Middle East. The Infrastructure segment was a key driver, securing ₹495 billion in orders, a 77% year-on-year growth, with 63% from international markets. The Energy Projects segment also saw healthy revenue growth of 31% to ₹89 billion, primarily from international hydrocarbon projects.

    Strategically, L&T has carved out a separate Renewable Energy business vertical and is expanding its electrolyser manufacturing capacity to 500 megawatts in the near term, with plans to reach 1 gigawatt in the medium to long term. The company is also making strides in semiconductor design through LTSCT, which recently acquired SiliConch Systems Private Limited and inaugurated a new development center. In the data center business, a 2 MW facility in Panvel is nearing commissioning, and plans are underway to scale the Chennai data center to 30 MW. The Real Estate development business targets ₹8,000 crores in order inflows and ₹5,000 crores in revenues by FY26, with aspirations for three to four times growth beyond that.

    Management reiterated its full-year FY25 guidance: 10% growth in group order inflows, 15% growth in group revenues, Projects and Manufacturing portfolio margins of 8.2% to 8.25%, and Net Working Capital to Revenue around 15% by March 2025. They expressed optimism for a stronger domestic ordering environment in H2 FY25, citing a robust prospect pipeline of ₹8.08 trillion. While acknowledging global geopolitical uncertainties and Red Sea disruptions, L&T remains confident in India's economic resilience and the continued investment focus in the Middle East. The company's focus on profitable growth, timely execution, and strong cash flows, with cash flow from operations more than doubling to ₹77 billion, contributed to an improved trailing 12-month ROE of 16.1%.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.