Larsen & Toubro gains 4% post Q2 results, strong order book position

Shares of Larsen & Toubro (L&T) were up 4 per cent at Rs 1,861 on the BSE in Thursday’s intra-day trade after the company posted a healthy operational performance for the quarter ended September 2021 (Q2FY22). The company’s order backlog remains strong at Rs 3.3 trillion. The stock of construction & engineering major had hit a record high of Rs 1,884.90 on October 19, 2021.

L&T said it has bagged orders worth Rs 42,140 crore during Q2FY22, registering a robust growth of 50 per cent compared with the corresponding period of the previous year. Orders were received in various segments like oil & gas, metros, rural water supply, minerals and metal, public space and power transmission and distribution. The International orders at Rs 22,116 crore during the quarter comprised 52 per cent of the total order inflow, the company said.

On a consolidated basis, adjusted revenues on like-to-like basis grew by 12 per cent year-on-year (YoY) to Rs 34,773 crore. Earnings before interest, tax, depreciation and amortization (ebitda) margins improved to 11.5 per cent from 10.7 per cent in a year ago quarter. Consolidated net profit jumped 56 per cent YoY at Rs 1,723 crore.

The growth is mainly driven by higher profits in the IT&TS portfolio and improved margins from the projects & manufacturing portfolio as the pandemic induced stress in previous periods progressively wanes out.

The management said the company continues to focus on profitable execution of its large projects order book, leverage the strong growth momentum in its IT & TS portfolio, cost optimization measures through automation and intensive use of digital technologies, release of funds through improved working capital management and a phased divestment of noncore assets.

“L&T posted decent performance on operational front amid unlock while infrastructure segment saw some green shoots with improvement on margin, productivity and job mix. The stable working capital to sales, reduced debt, better cash flow situation has provided further liquidity comfort on balance sheet front in these challenging times”, ICICI Securities said in a note.

“L&T rightly prioritized balance sheet strength over growth during the second COVID wave. Labour availability no longer poses a challenge, and execution is expected to improve from hereon as construction activity picks up post monsoon. We believe that L&T is poised for a strong earnings growth momentum, if and when the order inflow gains momentum. The company has some more asset monetization opportunities to capitalise on, including the sale of Nabha Power, a stake sale in L&T IDPL, and monetisation of the Hyderabad Metro,” Motilal Oswal Securities said in results update.