Larsen & Toubro (L&T), the engineering and construction behemoth, announced its third-quarter results for FY2024-25 on January 30, reporting a 14% rise in net profit to ₹3,359 crore from ₹2,947 crore in the same quarter last year. However, the earnings fell short of market expectations as operating margins contracted due to rising input costs.
Revenue and Profit Growth Miss Street Estimates: Larsen & Toubro (L&T)
L&T’s revenue saw a healthy 17% growth, reaching ₹64,668 crore in Q3FY25, compared to ₹55,128 crore in Q3FY24. However, this fell slightly below analyst estimates. A Moneycontrol poll of six brokerages had projected an 18% YoY revenue increase to ₹65,065 crore, while net profit was expected to grow by 24% to ₹3,657 crore. The lower-than-expected earnings highlight challenges in maintaining profitability despite strong order inflows.
EBITDA and Margins Take a Hit
A key concern for investors was the decline in L&T’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin, which fell by 70 basis points (bps) to 9.7%, down from 10.4% in Q3FY24. The company’s EBITDA for the quarter stood at ₹6,255 crore, growing 9% YoY but missing analyst expectations of an 18% rise to ₹6,779 crore.
The drop in margins was primarily driven by higher raw material costs, which surged 50% YoY, and a 16% rise in construction material expenses. As L&T continues to execute large-scale infrastructure and engineering projects, cost pressures remain a critical factor impacting profitability.
Robust Order Book and Strong Inflows
Despite the margin concerns, L&T witnessed a strong 53% YoY jump in order inflows, securing ₹1,16,036 crore worth of projects in Q3FY25 compared to ₹75,990 crore a year ago. The company’s order wins spanned various segments, including:
- Thermal and renewable power
- Power transmission
- Precision engineering
- Minerals & metals
- Water infrastructure
- Commercial buildings
- Hydrocarbon onshore projects
International business played a significant role in L&T’s growth, with global orders contributing ₹62,059 crore, making up 53% of the total order inflow. However, this was lower than last year’s proportion, when international orders accounted for 67% of the total inflow.
L&T’s consolidated order book swelled to ₹5,64,223 crore at the end of December 2024, providing a strong revenue visibility. Of this, 42% of orders were from international markets, underscoring L&T’s expanding global footprint.
Stock Performance and Key Financial Metrics
L&T’s stock has been in focus following the results, and here’s a snapshot of its key financial metrics:
- Market Capitalization: ₹4,70,342 crore
- Current Price: ₹3,420
- 52-Week High / Low: ₹3,964 / ₹3,175
- Stock P/E: 34.9 (higher than the industry average of 31.4)
- Book Value Per Share: ₹649
- Dividend Yield: 0.82%
- Return on Capital Employed (ROCE): 13.4%
- Return on Equity (ROE): 14.7%
- Debt Levels: ₹1,26,183 crore
While L&T remains a market leader in infrastructure and EPC projects, rising debt levels and shrinking operating margins are key risks that investors must monitor.
Future Outlook: Growth vs. Cost Pressures
L&T’s strong order book and execution capabilities position it well for future growth. However, higher input costs, rising interest rates, and global economic uncertainties could impact margins in the coming quarters.
The company is expected to benefit from the Indian government’s continued focus on infrastructure spending, particularly in railways, highways, renewable energy, and urban development projects. Additionally, overseas expansion in the Middle East and Africa provides further growth opportunities.
Final Thoughts
L&T’s Q3 results showcased strong revenue and order inflows, but the decline in EBITDA margins and rising costs have raised concerns. While the company missed analyst expectations, its resilient business model, diversified order book, and international presence continue to make it a long-term play for investors.
For more market insights, follow our blog.
Stay tuned for more updates and insights on the stock market! For more insights on investing in the Indian stock market, check out resource like ET, NSE India.
Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.