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Larsen & Toubro: CMP: 3690: LONG TERM SALES GR: 16 Q1_FY25: 15% | Q1_fy25 Results Update
History: Larsen & Toubro Ltd, commonly known as L&T, is an Indian multinational conglomerate, with business interests in engineering, construction, manufacturing, technology and financial services. The company is counted among the world's top five construction companies. Larsen & Toubro originated from a company founded in 1938 in Bombay by two Danish engineers, Henning Holck-Larsen and Søren Kristian Toubro. This year we may see Larsen & Toubro reach an almost 2 lakh crore landmark revenue Indian multinational engaged in EPC Projects, Hi-Tech Manufacturing and Services. It operates in over 50 countries worldwide. A strong, customer–focused approach and the constant quest for top-class quality have enabled L&T to attain and sustain leadership in its major lines of business for eight decades. Have not seen Loss and have paid consistent dividends for not 10-20 years but for 7&Half decades consistently. Just a decade back we used to see 91% of sales from Infra but they have become well-diversified and now 47% of sales come from Infra while 32% from IT & Techno while remaining from Energy, finance & other segments. On the Green Energy side, L&T Electrolysers Limited has emerged as a successful bidder with an allotted capacity of 63 MW under the tranche-I of the PLI scheme for electrolyser manufacturing, launched by the Ministry of New and Renewable Energy. Finally, incorporated a wholly-owned subsidiary, L&T Semiconductor Technologies Limited on November 29, 2023. Over time, this company will be engaged in the business of fabless semiconductor chip design and product ownership.
Revenue and profit were 8000 Cr and 300 Cr respectively during 2001. Yesterday’s Revenue is today’s profit, which is more than 15000 Cr. Hence investment has shown a 150X return along with dividend income every year of what we would have invested during the last 20 years. A 25% dividend distribution for the last 20 years. We were expecting LT to enter into the elite club of 2 lakh Cr revenue-making companies and yes this year we saw this milestone. No doubt a wealth creator. The Infra sector as a whole has not been good during the previous decade due to low infra spending & we saw several wealth destroyers companies from this segment, but this decade would be known as decade of Infra spending in India. The last 3 years have been good for infra as the Government is highly aggressive in infra spending. We saw strong capital expenditure by the Government. Even during this budget capital expenditure is high with infra-allotment of 11 Lakh Cr which is highest till time. Shows India's infra towards developed countries.
Q1 FY25 Results Larsen & Toubro (L&T):
### Growth in Order Book and Order Flow Segment-Wise
- **Infrastructure Projects Segment**:
- Order inflow: ₹40,053 crore (49% international orders)
- Order book: ₹324,879 crore (28% international orders)
- Customer revenues: ₹26,908 crore (22% y-o-y growth, 34% international revenues)
- EBITDA margin: 5.8%
- **Energy Projects Segment**:
- Order inflow: ₹8,792 crore (21% y-o-y growth, 22% international orders)
- Order book: ₹117,724 crore (76% international orders)
- Customer revenues: ₹8,495 crore (27% y-o-y growth, 68% international revenues)
- EBITDA margin: 8.7%
- **Hi-Tech Manufacturing Segment**:
- Order inflow: ₹3,677 crore (100%+ y-o-y growth, 8% export orders)
- Order book: ₹33,765 crore (7% export orders)
- Customer revenues: ₹1,845 crore (4% y-o-y growth, 23% international revenues)
- EBITDA margin: 17.4%
- **IT & Technology Services Segment**:
- Customer revenues: ₹11,505 crore (6% y-o-y growth, 92% international revenues)
- EBITDA margin: 20.0%
- **Financial Services Segment**:
- Income from operations: ₹3,664 crore (21% y-o-y growth)
- Loan book: ₹88,717 crore (4% growth from March 2024, 13% y-o-y growth, 95% retail loans)
- PBT: ₹922 crore (29% y-o-y growth)
- **Development Projects Segment**:
- Customer revenues: ₹1,327 crore (3% y-o-y growth)
### Sales and Profit Growth in %
- **Revenue from Operations**: ₹30,278.75 crore (12% y-o-y growth)
- **Profit Before Tax (PBT)**: ₹4,676.65 crore (7.9% y-o-y growth)
- **Net Profit**: ₹3,440.11 crore (10.4% y-o-y growth)
### Segmental Growth
- **Infrastructure**: 22% y-o-y revenue growth
- **Energy**: 27% y-o-y revenue growth
- **Hi-Tech Manufacturing**: 4% y-o-y revenue growth
- **IT & Technology Services**: 6% y-o-y revenue growth
- **Financial Services**: 21% y-o-y revenue growth
- **Development Projects**: 3% y-o-y revenue growth
### Profitability Ratios
- **Operating Margin**: 10.19%
- **Net Profit Margin**: 6.25%
### Solvency Ratios
- **Debt to Equity Ratio**: 1.12 (High due to Financial Service Subsidiary)
- **Debt Service Coverage Ratio (DSCR)**: 1.35
- **Interest Service Coverage Ratio (ISCR)**: 5.22 (Low due to Financial Service Subsidiary)
### Liquidity Ratios
- **Current Ratio**: 1.19
### Important Insights and Highlights
- Steady growth across all financial parameters despite geopolitical challenges.
- Significant orders received in multiple segments including offshore hydrocarbon, renewables, and precision engineering.
- Remarkable transformation in the Financial Services portfolio with a shift towards retail finance.
- Recognition for exceptional credit quality and ESG performance.
### Industry Outlook
- Strong outlook for infrastructure development, particularly in energy and hi-tech manufacturing.
- Continued momentum in the Middle East and increasing opportunities in sectors like nuclear power, health, and precision engineering.
### Peer Group of Companies
- **Infrastructure**: Reliance Infrastructure, Tata Projects, GMR Infrastructure
- **IT & Technology Services**: TCS, Infosys, Wipro
- **Financial Services**: HDFC, ICICI, Bajaj Finance
- **Development Projects**: Adani Group, Essar Projects
### Future Outlook
- L&T is well-positioned to leverage opportunities in both traditional and new-age businesses.
- The company is expected to benefit from ongoing economic tailwinds in India and policy support.
- Targeting significant growth by 2026 (Lakshya 26 targets).
### Conclusion
L&T has demonstrated robust growth across various financial metrics in Q1_FY25, with significant improvements in revenue, profit margins, and order inflows. The company's diversified business segments, strong execution capabilities, and strategic focus on high-growth areas have contributed to its strong performance. These factors make L&T an attractive investment option, showcasing its resilience and potential for sustained growth in the future.
We may see at least 15-18% sales growth and around 11% profit growth this year.
As India is moving towards strong infra we may see Largest Infra company moving towards 5 Lakh Cr turnover till year 2030. Company is strong and consistent profit-making giving investors high consistency in Earnings.
Already recommended to buy during past fall near 1500, we may see the rally towards the estimated targets of 5541 in the next few years. New buying again can be done during any fall near 2536. Range for next few years can be assumed to be 2500 to 6000 where buying can be done at low while some 5% profits can be booked during the rally near 5541. Long term growth of a minimum of 12%-15% should be assumed which can take your LT towards the Profits of 50000 Cr till 2035. Multi Year rally along with high consistent profits and hence consistent and growing dividends should be expected. Yes, this is the stock for long-term wealth, and 3-4% weightage in the portfolio could be given. LT is a promoter-less company, Different MF & insurance companies holds around 40% stake while FPI holds around 23% stake. LIC|GIC holds around 20%. The majority of the directors have been with the company for 3 decades.
Disclosure: We are not a Tip Providing Company; we should study the company before buying.
