On Thursday’s trading session, the shares of an engineering and construction major surged by 2.5 percent to Rs. 3,606.25, after reporting strong guidance and financial results for Q1 FY24-25 with a rise in the net profit by 10.4 percent YoY.
At 09:44 a.m., the shares of Larsen & Toubro (L&T) Limited were trading 1.9 percent higher at Rs. 3,586.35, as against its previous closing price of Rs. 3519.4, with a market capitalisation of Rs. 4.94 lakh crore.
What’s the News:
The fluctuations in the share prices were observed after the company announced the financial results for Q1 FY24-25, through the recent filings with the stock exchanges on Wednesday post-market hours.
The revenue from operations for Q1 FY24-25 stood at Rs. 55,120 crores, marking a 15 percent YoY rise from Rs. 47,882 crore in Q1 FY23-24, with robust execution witnessed in the Projects & Manufacturing (P&M) portfolio on the back of a large order book.
However, the consolidated revenues decline by 17.8 percent quarter-on-quarter from Rs. 67,078 crore in Q4 FY23-24 to Rs. 55,120 crore in Q1 FY24-25.
International revenues during the quarter at Rs. 26,248 crores constituted 48 percent of the total revenues.
The net profit jumped by 10.4 percent to Rs. 3,440 crore in Q1 FY24-25 as against Rs. 3,116 crore in Q1 FY23-24, but on a quarter-on-quarter basis, it fell by 31.2 percent from Rs. 241 crore in Q4 FY23-24.
Order Book of the company:
L&T received orders worth Rs. 70,936 crore at the group level during Q1 FY24-25, registering a growth of 8 percent YoY aided by the strong ordering momentum in the Middle East.
During the quarter, orders were received across multiple segments like Offshore vertical of the Hydrocarbon business, Renewables, Transmission & Distribution, Roads, Nuclear Power, Hydel & Tunnel, Ferrous Metals, Health, and the Precision Engineering sectors.
International orders at Rs. 32,598 crores during the quarter comprised 46 percent of the total order inflow.
The consolidated order book of the group as on 30th June 2024, stood at ₹ 490,881 crore registering a growth of 3 percent over March 2024 and 19 percent YoY with the share of international orders at 38 percent.
Management guidance:
Looking ahead, L&T anticipates that India’s economic growth will continue in the medium term, supported by increased capital investments from both public and private sectors.
The company highlighted in a stock exchange filing that with the Union Elections concluded and the likely political stability, the Government’s ongoing emphasis on capex and positive business sentiment bodes well for investment activities.
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However, despite the anticipated strong domestic growth momentum, L&T expects a slowdown in infrastructure progress due to shortages of skilled labour in certain sectors.
Additionally, the company expects a recovery in international orders, although it acknowledges the potential for economic volatility leading up to the US Presidential elections in November.
“With the change of Government in UK, and a hung parliament in France, the concern about the European economic recovery remains. China’s economic recovery remains debatable with rising trade tensions threatening to overshadow growth in exports,” L&T further added.
“The Union Budget released yesterday presented a detailed roadmap towards pursuit of a Viksit Bharat by 2047. With the expected policy continuation in India, the tailwinds in the Indian economic growth is likely to continue which will facilitate the Group to achieve its Lakshya 26 targets,” the company’s Chairman and Managing Director commented.
Lakshya 2026 aims to significantly enhance the company’s financial performance and operational focus by FY25-26.
Under the Lakshya 2026 target, L&T aims to increase its revenue from Rs. 1.4 trillion in FY21 to Rs. 2.7 trillion by FY26, representing a CAGR of ~15 percent.
The company targets an order inflow of Rs. 3.4 trillion by FY26, up from Rs. 1.7 trillion in FY21, which translates to a CAGR of about 14 percent.
L&T plans to achieve an RoE of over 18 percent by FY26, up from 10 percent in FY21, excluding exceptional items.
Moreover, L&T retains the focus on the profitable execution of its robust order book, especially since the business environment is quite steady.
The company is well-positioned to take advantage of emerging opportunities across the diversified business portfolio while reducing risks in non-core businesses.
Brokerages Target:
Citi, an international brokerage firm, maintained a ‘buy’ recommendation on L&T, setting a target price of Rs 4,396, indicating a potential upside of nearly 23 percent from the current trading price of Rs. 3,586.35.
They emphasised L&T’s robust positioning to benefit from growth capital expenditures (capex) in India and the Middle East.
Written by Shivani Singh
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