L&T Shares Dive After Q3 Results Miss Street Estimates; International Orders Surge, Domestic Concerns Weigh

Larsen & Toubro Ltd (L&T) faced a significant setback as its share price plummeted by 7% in Wednesday's morning trades following the release of its October-December 2023 (Q3) quarterly earnings report. While the international order book witnessed a remarkable surge, concerns loom over the decline in domestic orders, leaving investors and analysts grappling with the mixed bag of financial results.

L&T reported a consolidated net profit of Rs 2,947 crore for Q3 FY24, marking a 15% YoY increase. The surge was attributed to improved execution of infrastructure projects and sustained growth in the IT and tech services portfolio. However, the figures fell short of market expectations, with revenue reaching Rs 55,128 crore, a 19% YoY increase but lower than anticipated.

International orders played a pivotal role in bolstering L&T's order book during the quarter, accounting for 67% of the total order inflow at Rs 50,562 crore. The consolidated order book stood at Rs 4,69,807 crore, with international orders contributing 39%. This reflects a substantial growth compared to the previous year's figures of Rs 3,86,588 crore.

L&T's infrastructure projects segment witnessed a surge in order inflows, reaching Rs 43,208 crore, a 33% YoY increase. However, the operating profit margin fell to 5.5% in Q3 FY24, down from 7% in the corresponding period a year ago, largely due to aggressive pricing strategies post-COVID-19. CFO R Shankar Raman expressed optimism, anticipating improved operating margins in the upcoming financial year.

The energy projects segment recorded order inflows of Rs 13,281 crore, marking a substantial 47% YoY increase. International orders constituted 81% of the segment's order book, which stood at Rs 1,12,777 crore. Revenue rose by 24%, reaching Rs 7,870.30 crore, and profits surged by 40% to Rs 695.21 crore.

L&T's Hi-Tech Manufacturing segment reported order inflows of Rs 2,043 crore, a 6% YoY increase. The order book reached Rs 25,758 crore, with international orders constituting 8%. Despite the slow inflow in the first half of FY24, Raman expressed confidence in future growth, anticipating a boost from government-awarded defence contracts.

The IT & Technology Services segment exhibited positive growth, with revenues reaching Rs 11,325 crore, a 5.7% YoY increase. International billing contributed 93% to the total customer revenues. Profits soared by 16% to Rs 1,970.83 crore, and the EBITDA margin improved to 20.7%.

L&T foresees a temporary slowdown in public capital expenditure due to upcoming general elections in 2024. The conglomerate remains cautious amid the global economic volatility, citing military engagements in Europe and West Asia disrupting supply chains. While the US economy remains resilient, concerns persist over the weak UK and European economies, along with uncertainties surrounding China.

The shares of Larsen & Toubro were seen trading with cuts of more than 4% at Rs 3,475 per share as of 11:40 am on the National Stock Exchange (NSE). The stock has offered returns of more than 72% to its investors in the last one year.

L&T's Q3 FY24 performance, marked by a surge in international orders and promising growth in key segments, reflects a complex economic landscape. While the conglomerate faces challenges in the domestic market and concerns about global economic uncertainties, the strategic focus on international expansion and diversified business segments may position L&T for future resilience.