L&T Q3 Results: Profit Exceeds Street Estimates As Economic Activity Recovers
A trainee learns carpentry at L & T Construction Skills Training Institute in Panvel, India. (Photographer: Adeel Halim/Bloomberg)

L&T Q3 Results: Profit Exceeds Street Estimates As Economic Activity Recovers

Larsen & Toubro Ltd.'s third-quarter profit grew marginally while revenue fell even as order flow was boosted by a high-speed rail contract among other big ones in the quarter.

Net profit for India's largest engineering-to-construction company rose 4.8% over a year earlier to Rs 2,466.7 crore in the quarter ended December, the company said in its stock exchange filing. That compares with the Rs 1,902.2 crore consensus estimate of analysts tracked by Bloomberg.

Revenue declined 1.78% to Rs 35,596 crore--analysts estimated Rs 36,612.4 crore.

Ebitdta margin stood at 12.02% in the third quarter compared with 10.7% the preceding quarter and 11.4% a year earlier. The estimate was 10.8%.

In the quarter ended December, the company received fresh orders worth Rs 73,233 crore, the highest in any quarter, led by the high-speed bullet rail contract. In nine months ended December, order book stood at Rs 1.24 lakh crore.

Order Book

Infrastructure was the best contributing segment to order flow, followed by hydrocarbons.

Order Book - Key Highlights (Q3 order flow, Apr - Dec order book position)

Infrastructure
Q3: Rs 45,574 crore
9M: Rs 2,45,316 crore

Power
Q3: No major order
9M: Rs 13,710 crore

Heavy Engineering
Q3: Rs 998 crore
9M: Rs 3,645 crore

Defence Engineering
Q3: Rs 705 crore
9M: Rs 8,795 crore

Hydrocarbon
Q3: Rs 12,820 crore
9M: Rs 45,887 crore

Segment Snapshot

Infrastructure segment is yet to fully recover and the revenue of the segment declined 8% over a year earlier. The power segment was the best performer with a growth of 29%. Information and operational technology services also saw a growth. Heavy engineering contracted marginally, while financial services revenue also declined.

“There’s been a remarkable recovery of business sentiment; Q3 was quarter of turnaround,” said R Shankar Raman, group chief financial officer at L&T, in an post-earnings conference call.

Key takeaways from the conference call

  • There is a turnaround in economic and industrial activity in India.
  • We also saw uptick in the quarter in tendering and bidding activity
  • There has been tremendous improvement in mobility - labour, goods etc
  • Today we saw revenue in line with pre-Covid levels
  • There has been strong collections during the quarter
  • It led to reduction in working capital in excess of Rs 1,000 crore during Q3
  • Government resolve on infra spending - Metro, Water resources etc
  • Two third of government orders backed by multilateral spending
  • Private Capex continued to remain quiet during the quarter

There’s been a considerable spike in input cost in last 3 months, Shankar Raman said, adding that it has prompted a review of procurement requirement. The company’s managing director emphasised the same concern.

There is an extraordinary increase in steel and cement prices; we believe this is not warranted and we hope these prices are corrected.
SN Subrahmanyan, MD & CEO, L&T
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