Larsen & Toubro reports strong Q2 results

Larsen & Toubro Q2 Results Summary

L&T Delivers Strong Q2 Performance  On October 30, 2024, Larsen & Toubro reported strong Q2 results, demonstrating a 20.64% year-over-year (YoY) growth in revenue and a 5.36% YoY increase in profit. Compared to the previous quarter, revenue rose by 11.67%, while profit saw a significant jump of 21.88%.

Despite a slight rise in selling, general, and administrative expenses—up 2.03% quarter-over-quarter (q-o-q) and 9.76% YoY—the company managed to boost its operating income by 15.61% q-o-q and 13.05% YoY, showcasing effective cost management and operational efficiency.

The earnings per share (EPS) for Q2 reached ₹24.68, reflecting a 7.68% increase YoY, which underscores the company’s ability to enhance shareholder value despite market fluctuations.

In terms of stock performance, Larsen & Toubro experienced a return of -1.36% over the last week, -5.17% over the past six months, and -3.34% year-to-date. This recent decline may raise concerns for investors, even in light of the solid quarterly results.

As of October 31, 2024, the company has a market capitalization of ₹468,646.4 crore, with a 52-week high of ₹3,919.9 and a low of ₹2,871.05, indicating notable stock price volatility that has attracted the attention of market analysts.

Among the 30 analysts covering Larsen & Toubro, the ratings are mixed: 1 Strong Sell, 1 Sell, 4 Hold, 13 Buy, and 11 Strong Buy, with a consensus recommendation leaning towards Buy, reflecting optimism about the company’s future.

Key Financial Metrics:

L&T Delivers Strong Q2 Performance In the second quarter (Q2), Larsen & Toubro reported total revenue of ₹61,554.58 crore, reflecting a quarter-on-quarter (Q-o-Q) growth of 11.67% from ₹55,119.82 crore in Q1 and a year-on-year (Y-o-Y) increase of 20.64% compared to ₹51,024.04 crore in Q2 of the previous year.

Selling, general, and administrative (SG&A) expenses totaled ₹14,180.01 crore in Q2, showing a slight Q-o-Q rise of 2.03% from ₹13,897.98 crore in Q1, and a Y-o-Y increase of 9.76% from ₹12,919.24 crore in Q2 last year.

Depreciation and amortization expenses were reported at ₹1,023.84 crore, up 2.6% from ₹997.92 crore in Q1 and up 12.52% from ₹909.89 crore in Q2 of the prior year.

Total operating expenses amounted to ₹56,216.38 crore in Q2, marking an 11.31% increase from ₹50,502.45 crore in Q1 and a substantial 21.41% rise from ₹46,301.94 crore in Q2 last year.

Operating income for Q2 was ₹5,338.20 crore, a 15.61% increase from ₹4,617.37 crore in Q1 and a 13.05% rise from ₹4,722.10 crore in Q2 of the previous year.

Net income before taxes stood at ₹5,555.09 crore, representing an 18.78% increase from ₹4,676.65 crore in Q1 and an 11.3% increase from ₹4,991.07 crore in Q2 last year.

Net income for the quarter was ₹3,395.29 crore, up 21.88% from ₹2,785.72 crore in Q1 and a 5.36% increase compared to ₹3,222.63 crore in Q2 of the previous year.

Diluted normalized earnings per share (EPS) was reported at ₹24.68, an increase of 21.88% from ₹20.25 in Q1 and a 7.68% rise from ₹22.92 in Q2 of the previous year.

L&T Delivers Strong Q2 Performance  Shares of Larsen & Toubro (L&T), a leading construction and engineering firm, increased by as much as 5.61% to reach an intraday high of ₹3,598.40 on October 31, 2024. This rise followed the company’s strong Q2 results reported on October 30, 2024, which aligned with market expectations.

In the September quarter of FY25, L&T’s net profit climbed 5.4% year-over-year (YoY) to ₹3,395.3 crore, up from ₹3,223 crore in the same period last year. The company’s revenue from operations also saw a significant boost, surging 20.6% annually to ₹61,554.6 crore, compared to ₹51,024 crore in Q2FY24. However, the earnings before interest, tax, depreciation, and amortization (EBITDA) rose 13% YoY to ₹6,362 crore, although the EBITDA margin contracted by 70 basis points to 10.3%, down from 11% the previous year.

SN Subrahmanyan, the chairman and managing director, stated, “We have delivered yet another quarter of strong financial performance despite ongoing global macroeconomic volatility. Our projects and manufacturing sectors continue to perform well.” During the quarter ending September 30, 2024, L&T secured orders worth ₹80,045 crore at the group level, marking a sequential growth of 13% but a 10% decline YoY.

Subrahmanyan emphasized the company’s record order book exceeding ₹5 lakh crore, showcasing its capabilities in engineering, construction, manufacturing, and project management. He highlighted ongoing investments in green energy, data centers, digital platforms, and semiconductor design as strategies to enhance both digital and sustainability efforts. The outlook for India’s growth remains positive, supported by continued public capital expenditure and a recovery in private investments, with healthy capex momentum expected in the Middle East.

L&T Delivers Strong Q2 Performance  Analysts at Nuvama noted that L&T surpassed market estimates for Q2 EBITDA and profit after tax (PAT) by 4% and 6%, respectively, driven by strong execution. Despite a 10.2% YoY drop in order inflows due to a high base from last year’s hydrocarbon orders, the company has maintained its guidance for 10% YoY growth in order inflows, anticipating a robust second half of FY25.

Following a period of underperformance since their downgrade in January 2024, analysts have upgraded L&T to a ‘Buy’ rating, with a target price revised to ₹4,000 from ₹4,040. They expect large order inflows in the latter half of the year, particularly in the Middle East and India, and have retained their FY25 growth projections of 10% for order inflows and 15% for sales.

In conclusion, L&T is confident that the structural reforms implemented by the government over the last decade will enhance the quality of India’s growth and contribute to the realization of a developed Bharat by 2047. The company remains focused on technology-driven growth and providing sustained, profitable returns to its stakeholders.

At 9:23 AM, L&T shares were trading 5.47% higher at ₹3,593.45, while the BSE Sensex was down 0.17% at 79,809.

L&T Delivers Strong Q2 Performance  Shares of Larsen & Toubro (L&T) surged by 4.8% to reach an intraday high of ₹3,572 on the BSE on Thursday, following the company’s report of a 5% increase in net profit for the quarter ending September 2024. The net profit rose to ₹3,395 crore, up from ₹3,223 crore in the same period last year, surpassing analysts’ expectations of ₹3,335 crore.

L&T’s consolidated revenue for the quarter was ₹61,555 crore, reflecting a year-on-year growth of 21%, driven by accelerated progress in various sectors within the Projects & Manufacturing (P&M) portfolio. International revenue constituted a significant portion, totaling ₹32,057 crore, or 52% of total revenues, highlighting a strong international P&M order book, according to the company’s filing.

During the quarter, L&T secured orders worth ₹80,045 crore at the group level, representing a sequential growth of 13% but a 10% decline compared to the previous year.

UBS has maintained a ‘Neutral’ rating on L&T with a target price of ₹4,000. They noted that the Middle East significantly contributed to a strong core results beat in Q2 FY25, while the domestic market continues to lag. Profitability in the energy and hi-tech segments declined, limiting core margin improvements for both Q2 and H1. UBS suggests that L&T could enhance its conversion rates and increase market share in domestic orders by utilizing its current pipeline.

L&T Delivers Strong Q2 Performance  Bernstein has given L&T an ‘Outperform’ rating with a target price of ₹3,891. They acknowledged the effective international hedge for Q2 FY25, highlighting the company’s robust execution and solid working capital position. However, order inflows have declined due to a high base from the previous year. While management has retained its guidance, Bernstein views achieving these targets as challenging. They expect core margins to continue to exceed last year’s levels and anticipate strong performance driven by soft commodity prices, expressing confidence in growth prospects for both India and the Middle East.

Similarly, NP Paribas has rated L&T as ‘Outperform’ with a target price of ₹4,421. They believe the company is on track to meet its guidance targets, with order inflow goals appearing more achievable than previously anticipated. The Middle East market shows resilience, with no signs of slowing, and capital expenditure in the region is expected to bolster growth in CY25. Additionally, valuations have improved following recent corrections, indicating potential for a rerating impact.