Shares of Larsen & Toubro (L&T) jumps over 4% to intra-day high of Rs 3,550 on NSE as the company reported a 5% year-on-year (YoY) increase in its net profit for Q2FY25, with profit reaching R 3,395 crore for the quarter ended September 2024.
Strong Revenue Growth Driven by Projects & Manufacturing
L&T achieved a consolidated revenue of Rs 61,555 crore for the quarter, marking a robust 21% YoY growth. The rise in revenue is attributed to accelerated progress across various segments within the Projects & Manufacturing (P&M) portfolio.
For the half-year ending September 30, 2024, L&T’s consolidated revenue totaled Rs 1,16,674 crore, reflecting an 18% YoY increase. Of this, international revenues reached Rs 58,305 crore, representing 50% of the total half-year revenue.
Impact of Non-Recurring Gain in Prior Year
In its Q2 and H1FY24 consolidated performance, L&T had benefited from a non-recurring gain of Rs 512 crore due to the Transit Oriented Development (TOD) monetization within its Hyderabad Metro concession.
Adjusting for this one-time gain, the company reported underlying growth in consolidated net profit for Q2FY25 and H1FY25 at 25% and 19%, respectively, compared to the previous year.
Order Book and International Revenue Composition
During Q2FY25, L&T received orders worth Rs 80,045 crore at the group level, showing a sequential increase of 13% but a YoY decline of 10%, largely due to the high base from the previous year.
International revenues for the quarter were Rs 32,057 crore, constituting 52% of total revenues, reflecting the strength of L&T’s international P&M order book, according to the company’s filing.
Brokerages on L&T
Bernstein on L&T
Bernstein maintains an “Outperform” rating on Larsen & Toubro (L&T), setting a target price at ₹3,891 per share, citing strong execution and a robust working capital position as key drivers.
According to Bernstein, despite a decline in order inflows due to a high base from the previous year, L&T’s management has retained its guidance. The report notes that the company’s strong execution and working capital efficiency have effectively compensated for challenges in margin and order inflow.
Nomura on L&T
Nomura maintains a “Buy” call on Larsen & Toubro (L&T), with a target price set at Rs 4,100 per share, emphasizing a favorable risk-reward profile following strong results.
Nomura highlights that L&T’s order inflow beat estimates by an impressive 43%, and the FY25 order inflow growth guidance now appears achievable after a Q2 surprise. The report notes that L&T’s core margin stood at 7.6% in H1FY25, marking an improvement of 20 basis points year-on-year.
Additionally, management has retained its core EBITDA margin guidance, which Nomura considers conservative.
Morgan Stanley on L&T
Morgan Stanley maintains an “Overweight” rating on Larsen & Toubro (L&T), with a target price of Rs 3,857 per share. The report notes that initial skepticism around L&T’s orders, revenue, core margin, and net working capital was effectively addressed, as each metric exceeded expectations.
L&T’s core orders in the first half of the fiscal year amounted to Rs 1.17 lakh crore, which Morgan Stanley views positively, especially given the backdrop of weak government spending.
CLSA on L&T
CLSA maintains an “Outperform” call on Larsen & Toubro (L&T), setting a target price of Rs 4,151 per share, citing a strong Q2 performance that underscores the resilience of L&T’s business model.
The report highlights a third consecutive quarter of Engineering & Construction (E&C) margin expansion, with the infrastructure segment showing a notable 60 basis points increase in margins, which CLSA believes will surprise the market.
L&T achieved a robust 27% year-on-year growth in E&C execution, and order inflows significantly outperformed expectations despite a soft quarter for India. CLSA views the strong order inflow and execution on a lofty base as key positives and notes that the company remains confident in achieving its FY25 inflow guidance.
Stock Performance in Last One Year
Larsen & Toubro (L&T) has shown a mixed performance in recent periods. Over the past month, the stock delivered a negative return of 7.27%, marking a short-term downturn. The last six months proved challenging as well, with L&T posting a 5.17% decline, reflecting ongoing pressures.
Year-to-date performance remains in negative territory, with the stock down by 3.34%. Despite these shorter-term setbacks, L&T demonstrated resilience over a longer period. Over the past twelve months, the stock achieved positive returns of 16.36%.
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