L&T Q4 Results: Revenue Rises; Inflation, Supply Woes Weigh On Margin

Larsen & Toubro Ltd.’s fourth-quarter revenue rose as orders picked up on improving construction activities.

Revenue of India’s largest engineering-to-construction company increased 9.9% year-on-year to Rs 52,850.7 crore in the three months ended March, according to an exchange filing. That compares with the Rs 53,018.7-crore consensus estimate of analysts tracked by Bloomberg.

L&T Q4 FY22 Highlights (YoY)

• Net profit up 11.98% to Rs 4,138.47 crore, compared with the estimated Rs 3,438 crore.

• Operating profit down 20.53% to Rs 6,520.5 crore, against the Rs 6,874-crore forecast.

• Operating margin stood at 12.34% against 17.06% a year ago and 13% estimate.

“The margin for the quarter and year shows signs of inflation, supply-side constraints,” said Shankar Raman, chief financial officer at L&T. “The commodities have become expensive and sourcing had to be changed on the go due to sanctions.”

L&T’s order flow stood at Rs 73,941 crore in the reported quarter compared with Rs 50,359 crore in the preceding three months, led by the infrastructure and hydrocarbon segments.

• Its total order book grew 10% over the year earlier to Rs 1.92 lakh crore.

• The cumulative order inflow for the full fiscal ended March 2022 stood at Rs 3,57,595 crore.

• International orders stood at Rs 32,241 crore during the fourth quarter, constituting 44% of the total order flows.

Revenue of its mainstay infrastructure segment grew at 13.3%.

“Temporary disruptions in supply chain has led to a decline in net revenue for hydrcarbons by 3.2%,” said Raman. The power segment, he said, is seeing subdued ordering environment in thermal business. “Opportunities seen in conversion of carbon gases but are smaller orders.”

Deferral of awards impacted by order inflows during the quarter in heavy engineering, Raman said. “Late receipt of orders in current year impacts revenue in Q4 for heavy engineering.”

Through its five-year strategic plan called Lakshya’26, the company will pursue profitable growth in its traditional businesses of EPC projects and manufacturing, it said in the filing.

“The group will look to expand the size and scale of its IT and technology services portfolio. The company will incubate digital offerings in data centers, tech education and B2B e-commerce,” it said. It also has plans to invest in the new areas of green energy.

High input prices owing to crude oil price fluctuations and other commodity prices resulting in supply-chain disruptions, however, “could pose a threat to the growth plans of the country in the short-term”.

Shares of L&T fell 2.84% before the results were announced compared with 2.22% decline in the benchmark Nifty 50.