L&T Q2 net profit rises 22.5%, revenue up 23% on strong order inflows- QHN

Engineering major Larsen & Toubro (L&T) on Monday reported a 22.5 per cent growth in consolidated net profit to Rs 2,229 crore for the quarter ended September 30, 2022 (Q2).

While the numbers were below street estimates of Rs 2,334 crore for the period according to a poll of analysts by Bloomberg, L&T’s chief financial officer R Shankar Raman said in a media call that the bottomline was stable amid sustained volatility in currency and commodity prices. In the year-ago period, the net profit was Rs 1,819 crore.

Sequentially, the net profit was up nearly 31 per cent in Q2, its financial results showed. “The conflict in eastern Europe impacting food and energy supply chains and the possibility of stagflation resulting from supply-led inflation in an uncertain demand environment are key downside risks,” Shankar Raman said on the challenges for the company. “The silver lining is the visibility of a continuing domestic consumption demand that augurs well for new investments,” he added.

Profit before interest depreciation and tax (PBIDT) came in at Rs 5,638 crore for Q2, a growth of 24.5 per cent over the year-ago period. Sequentially, PBIDT was up 21.2 per cent versus the June quarter, its results showed.

Operating margins dipped by a marginal three basis points to 11.46 per cent versus last year, the company’s results showed.

L&T’s results are often seen by experts as a barometer of capital expenditure in the economy. This is due to the public and private infrastructure projects or orders that the company undertakes.

In Q2, the company gained from strong order inflows in the domestic market, with consolidated revenue from operations increasing by 23 per cent to Rs 42,763 crore in the period. This is higher than the Bloomberg consensus estimate of Rs 39,149 crore for the quarter.

The company recorded orders worth Rs 51,914 crore at the group level in Q2, registering a growth of 23 per cent over the corresponding quarter of last year. Of this, domestic orders contributed two-thirds to inflows, while international orders contributed to a third. The infrastructure segment, in particular, was a big driver of order inflows in Q2. The segment more than doubled its total orders recorded in Q2 versus last year at Rs 25,058 crore, Shankar Raman said.

Analysts, however, struck a note of caution, saying that the share of international orders have dipped in Q2, notably from the Gulf region. The overall order inflow growth of 23 per cent in Q2 was also lower than the 57 per cent order inflow growth reported in the June quarter. But some analysts said the June quarter of the current financial year gained from a low base effect owing to Covid-19 restrictions in the corresponding period last year. The July-September period of last year saw the low base effect begin to fade as restrictions were removed. So, growth in order inflows in Q2 reflects that trend.

“The company has reported strong growth for revenue, profitability and order inflows in Q2. An expected healthy pick-up in ordering activities and a sharp improvement in order inflow augurs well for the company,” Arafat Saiyed, senior research analyst at Mumbai-based brokerage Reliance Securities, said.

Shares of L&T closed trade 2.5 per cent up on the BSE on Monday at Rs 2,023.95 apiece. In the last one year, the stock has risen over 11 per cent on the BSE.