Larsen & Toubro Limited Q4FY21 - Earning Analysis

The company’s performance was strong, reflecting the impact of unlocking the economy prior to the second wave on project execution going forward the management is apprehending positive execution of order books . At the CMP of Rs. 1414, the stock is trading at full year P/E multiple of 17 times with the full year EPS of Rs 82.49 per share.

The Company reported consolidated profit at Rs 3,292.81 crore for the quarter ended March 2021, registering a 3% growth compared to the year-ago quarter. This profit was from continuing as well as discontinued operations.

Profit from continuing operations at Rs 3,820.16 crore increased 11.4% YoY in Q4. Higher tax cost (up 116% YoY to Rs 2,086.71 crore) and lower-than-expected revenue growth impacted profitability.

The company’s consolidated revenue was up 9% y-o-y at Rs 48,088 crore, in line with the estimates, while the Ebitda (earnings before interest, tax, depreciation and amortisation) surged a good 25% y-o-y to Rs 6,390 crore, much ahead of analyst expectations of Rs 5,516 crore. Consequently, operating margins were up 170 basis points y-o-y to 13.3%.

L&T’s board also approved a final dividend worth Rs 18 per share for the financial year ended March.

Management Takeaways:

The order inflow at Rs 50,651 crore was lower by 12% y-o-y due to deferment of awards. Significant orders during the quarter were received in various segments like factories, hydel and tunnel, metros, special bridges, nuclear power, rural water, renewable energy, hydrocarbon offshore, and minerals and metal.

International orders at Rs 18,439 crore made up 36% of the total order inflow, with receipt of biggest Solar PV plant order and transmission line orders.

The consolidated order book of the group stood at Rs 3.27 lakh crore as on March 31, 2021, registering a robust growth of 8% over March 31, 2020. International orders constitute 21% of the total order book.

As per the management last year was one of the toughest in company’s history. The Company is excited about the future for the fact that it has some extraordinary and technologically challenging jobs in its order backlog. However, year ahead has many unknowns. The Covid infection rate, supply chain matters, commodity prices and so on. The company will continue to build and execute on its commitments, but of course has to calibrate its growth in future based on operating environment and conditions.

The company is estimating that it could close FY22 with a growth that could range anywhere up to low to mid-teens in terms of order inflows and revenues. The company expects margins to remain stable with FY21. However, the company added that if the conditions change materially for the positive or negative, it will appraise the market. L&T did not give a guidance last year stating that the situation as a result of Covid-19 was new and the company did not know what it was staring at.

The company hopes that the government will persist with their plans for reviving the economic growth through robust investment programmes and accommodative policies, which it continued all through last year with orders coming in water, metros, power transmission, among others.

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