Last updated: 27 Jul, 2021 | 03:11 pm
Profit below estimates: Infrastructure giant L&T’s net profit declined 64.34% sequentially to Rs 1,174 crore for the quarter ending June compared to Rs 3293 crore last quarter. However, on a yearly basis, the profits surged by 287% from Rs 303 crore in the same quarter last year. Sharp rise in profits came as the government had imposed a complete national lockdown in April-May 2020, impacting business severely a year earlier.
Revenue declines: Consolidated revenue from operations declined by 39% sequentially to Rs 29,334.7 crore, missing street estimates of Rs 48,602 crore. Project progress was impacted with regional lockdowns, shortage of industrial oxygen and supply chain disruptions. On a yearly basis, the revenue rose by 38% from Rs 21,260 crore last year. The topline performance of the company was aided by better execution in the Apr-Jun 21 quarter, despite the challenges posed by the second wave. Localised restrictions allowed the company to keep projects going and face less severe labour shortage than during the national lockdown last year. Operating profits fell by 50.4% to Rs 3,171.5 crore below the street estimates of Rs 3,325 crore.
Lower order inflows: The company bagged orders worth Rs 26,557 crore at the group level during the quarter ended June registering a growth of 13% over corresponding period of the previous year. The consolidated order book of the group was at Rs 3.23 lakh crore as on June 30, 2021, with international orders at 20% of the total order book. International orders at Rs 9,045 crore during the quarter comprised 34% of the total order inflow.
L&T Q1 results : Important highlights
Segment Wise Performance: Most of the segments have reported a decline in revenue on a sequential basis except Development Projects and IT & Technology Services.
The Infrastructure segment was most impacted and the revenue fell by 60.12% sequentially and stood at Rs 10,543 crore mainly due to pandemic induced delay in tendering activities and finalization of orders. The segment order book was at Rs 2,44,621 crore on June 30, 2021, with the share of international orders in the order book at 20 %. The EBITDA margin of the segment during the quarter ended June was at 7.1% vis-à-vis 6.3% recorded in the corresponding quarter of the previous year.
The Power segment experienced substantial growth compared to the corresponding quarter of the previous year on receipt of an order for the Flue Gas Desulphurisation (FGD) project. The order book of the segment was at Rs 12,907 crore on June 30, 2021, with the international order book constituting 5 % of the total order book. The segment EBITDA margin for the quarter ended June was at 2.5 %, higher compared to the corresponding quarter of the previous year.
The Heavy engineering segment recorded a YoY growth of 19 % with a spurt of orders in refinery and oil and gas segments. International orders constituted 52 % of the total order inflow of the segment during the quarter. The order book of the segment was at Rs 4,373 crore on June 30, 2021, with export orders constituting 32 % of the total order book. The EBITDA margin of the segment at 17.9 % for the quarter ended June 30, 2021, registered marginal growth over 17.5 % of the corresponding quarter of the previous year.
The Defence engineering segment recorded substantial growth over the corresponding quarter of the previous year. The order book of the segment was at Rs 7,687 crore on June 30, 2021, with export orders constituting 9 %. The EBITDA margin of the segment at 20.3 % was higher for the quarter ended June as compared to 12.9 % of the corresponding quarter of the previous year due to changes in job mix and contingency releases.
The hydrocarbon segment secured International order inflow of 80 % of the total order inflow of the segment during the quarter. The segment order book was at Rs 40,825 crore on June 30, 2021, with the international order book constituting 36%. The EBITDA margin of the segment at 9.6% for the quarter ended June registered growth over 5.3 % of the corresponding quarter of the previous year.
The IT & Technology Services segment recorded customer revenues of Rs 7,241 crore during the quarter ended June 30, 2021, recording an industry-leading sequential growth of 6% and yearly growth of 20 %, reflecting a surge in demand for technology-led offerings in the sector. Export billing constituted 93 % of the total customer revenues of the segment for the quarter. The EBITDA margin for the segment increased to 23.1% for the quarter ended June, as compared to 20.7% in the corresponding quarter of the previous year, attributed to improved manpower utilization, increased offshoring and operational efficiency.
The Financial services segment recorded income from operations at Rs 3,061 crore during the quarter ended June, registering a yearly decline of 7 % on account of a decline in the loan book. The operating margin of the segment for the quarter ended June, was higher at 8.4% as compared to the corresponding quarter of the previous year with higher NIM% achieved on reduced cost of borrowing.
L&T Q1 results Review:
L&T has reported lacklustre numbers for the quarter ended June, as the second wave of Covid-19 pandemic impacted consumption and investment momentum severely. With the waning of the second wave of the pandemic and lockdown restrictions progressively being eased in the recent weeks, signs of pick-up in economic activity is visible.The company is optimistic of its growth aspirations in the medium term as the economic outlook improves and is committed to creation of sustainable returns to stakeholders.Company is also positive about the future as it sits on the largest backlog of orders in the company's history.
L&T Q1 earnings: Brokerage action
Most foreign brokerages including Jeffeires, Citi and Morgan Stanley have retained their positive view on the stock. Citi noted that as the economy improves, L&T should be able to make up for the order inflow and revenue miss for the rest of the year. Citi has a ‘Buy’ rating with a target price of Rs 1,785 on the stock. Morgan Stanley said that improving labour availability and strong order book should drive core earnings of the company. Morgan Stanley has a target price of Rs 1,894 on the shares.