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    Larsen & Toubro

    LT
    Construction·30 Jan 2025
    Management Summary

    Larsen & Toubro reported a robust Q3 FY25, achieving its highest ever quarterly order inflow of ₹1.16 trillion, driven by strong momentum in Infrastructure and Energy segments. The company's order book grew 20% YoY to ₹5.64 trillion, supporting a 17% increase in group revenues. Despite a slight dip in group EBITDA margin due to revenue mix and ITTS segment performance, PAT grew 14%, aided by improved treasury operations and efficient working capital management. Management expressed confidence in exceeding full-year order inflow and revenue guidance.

    Highlights

    8
    • Highest ever order inflow in history for Q3 FY25 at ₹1.16 trillion, a 53% YoY growth.

    • Order book stood at ₹5.64 trillion as of December 2024, marking a 20% YoY increase.

    • Group revenues for Q3 FY25 grew by 17% YoY to ₹647 billion.

    • Consolidated PAT for Q3 FY25 increased by 14% YoY to ₹33.6 billion.

    • Projects & Manufacturing (P&M) portfolio EBITDA margin was maintained at 7.6% for Q3 FY25.

    • Net Working Capital to sales ratio improved significantly to 12.7% as of December 2024 from 16.6% in December 2023.

    • Trailing 12-month Return on Equity improved by 90 basis points YoY to 16.1% for Q3 FY25.

    • L&T Energy Green Tech secured ₹300 crores in PLI incentives for 90,000 MTPA green hydrogen capacity over three years.

    Guidance & targets

    10
    CategoryTargetPriority
    Order Inflows
    Order Inflow Growth
    surpassing the 10%
    High
    Order Inflows
    Projects & Manufacturing Order Inflows
    almost Rs 500 billion
    High
    Revenue
    Revenue Growth
    potential upsides to the revenue guidance of 15%
    High
    Margin
    Projects & Manufacturing EBITDA Margin
    8.2%
    High
    Working Capital
    Net Working Capital to Revenue Ratio
    around the same levels that we have printed for as of December '24
    High
    Credit Cost
    Credit Cost Peak
    peak in Q4 FY '25
    Medium
    Credit Cost
    Credit Cost Normalization
    some normalization from Q1 FY '26 onwards
    Medium
    Investment
    E2E Networks Secondary Acquisition Completion
    6%
    High
    Green Energy
    Green Hydrogen PLI Total Benefit
    around Rs 300 crores
    High
    Debt
    Metro Third-Party Debt Reduction
    to come down to, say, Rs 9,000 crores or so
    Medium
    3 min read

    Detailed Narrative

    Larsen & Toubro delivered a robust performance in Q3 FY25, marked by record-breaking order inflows and strong execution across its core segments. The company reported its highest ever quarterly order inflow of ₹1.16 trillion, representing a significant 53% year-on-year growth. This surge was primarily driven by strong ordering momentum in the Infrastructure, Hydrocarbon, CarbonLite Solutions, and Precision Engineering & Systems businesses, with international orders contributing 52% to the Projects & Manufacturing (P&M) portfolio. The total order book expanded by 20% YoY to ₹5.64 trillion as of December 2024, providing healthy revenue visibility for future periods.

    Group revenues for the quarter grew by a healthy 17% YoY to ₹647 billion, with the P&M business contributing ₹473 billion, up 20% YoY. Despite this strong top-line growth, consolidated PAT increased by 14% YoY to ₹33.6 billion. The group-level EBITDA margin, excluding other income, stood at 9.7% for Q3 FY25, a slight dip from 10.4% in the prior year, attributed to a revenue mix favoring the P&M segment and lower operating margins in the IT & Technology Services (ITTS) portfolio. However, the P&M portfolio maintained its EBITDA margin at 7.6%, consistent with the previous year.

    Strategically, L&T Energy Green Tech secured ₹300 crores in PLI incentives for 90,000 MTPA green hydrogen capacity over three years, signaling commitment to energy transition. LTIMindtree and LTTS reported their highest-ever deal wins, with LTIMindtree securing USD 1.68 billion and LTTS recording 8 large deals. LTTS also completed the acquisition of Intelliswift for USD 110 million to enhance its digital offerings. In financial services, L&T Finance achieved 97% retailization of its loan book, ahead of its Lakshya 2026 targets, and maintained a healthy Return on Assets of 2.27%. The company also entered a strategic partnership with E2E Networks, acquiring a 15% stake for ₹10.79 billion, with an additional 6% expected by May 2025, to bolster its data center and AI cloud solutions.

    Management expressed strong confidence in the outlook for FY25, revising its order inflow guidance from 10% growth to "surpassing 10%" and indicating "potential upsides" to the 15% revenue growth guidance, citing a robust pipeline and strong performance in the first nine months. The NWC to revenue ratio guidance was also revised downward from 15% to around 12.7% for March 2025, reflecting improved working capital management. While acknowledging a softer Infrastructure margin in recent years, management anticipates improvement with the execution of new, large orders.

    Key concerns raised during the Q&A included the impact of delayed payments on domestic Infrastructure projects, particularly water missions, though a revival is expected from December onwards. Management was evasive on the submarine tender due to NDA constraints. They clarified that the Middle East market remains strong with no significant slowdown in payments or project reprioritization in their core oil & gas, carbon capture, and petrochemical sectors. The company also addressed the group EBITDA margin decline, attributing it to a shift in revenue mix towards lower-margin P&M and reduced operating leverage in the ITTS segment. Overall, L&T's management conveyed a bullish sentiment, underpinned by a strong order book, strategic investments, and a positive outlook for the Indian and GCC economies.

    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.