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Healthy performance amid execution pick-up…

L&T’s adjusted standalone revenues (ex-E&A business) for the quarter grew 9.2% YoY to | 29754.1 crore (vs. our estimate of | 29159 crore). On a standalone basis, infrastructure segment revenue (contributing ~83%) grew 2.9% to | 24765 crore YoY owing to job mix and site productivity, though execution improved sequentially due to higher work force mobilisation and supply chain normalisation. On a consolidated basis, adjusted revenues from continuing operations on a like-to-like basis grew 8.7% to | 48087.8 crore YoY. During the quarter, standalone EBITDA margins improved 240 bps to 12.1% (vs. our estimate of 10.5%) YoY owing to job mix and cost control initiatives. On a consolidated basis, EBITDA margins came in at 13.3% (vs. 11.6% in Q4FY20).

Decent order inflows led by infrastructure segment…

For Q4FY21, L&T registered reasonable order inflows at the group level worth | 50651 crore, down 12% YoY owing to deferral of a few awards. Key order wins received in various segments like factories, hydel and tunnel, metros, special bridges, nuclear power, rural water, renewable energy, hydrocarbon, minerals & metals segment. International orders for Q4FY21 came in at | 18439 crore contributing 36% to order inflows. Overall, FY21 order inflows came in at | 175497 crore, down 6% YoY. L&T’s order backlog as on FY21 was at | 327354 crore, up 8% YoY with international orders contributing 21%. L&T expects order prospects to the tune of | 9.06 lakh crore for FY22E, up 8.7% YoY.

Strong collections aid working capital, cash flows...

For Q3FY21, the cash flow from operations was robust, which was strongly supplemented by improvement in collections for Q4FY21. The CFO came in robust | 10110 crore (vs. | 6100 crore in Q4FY20). CFO for FY21 came in at | 18130 crore. New working capital to sale ratio improved to 22.3% for FY21 (vs. 23.7% in FY20) on account of a gradual improvement in business activities. For FY21, overall debt has declined by | 1000 to | 46100 crore while it declined by | 7900 crore QoQ. It expects to maintain working capital ratio at FY21 levels.

Valuation & Outlook

L&T reported decent order inflows while execution improved amid onsite productivity and supply chain normalisation leading to better margins. Also, better collections improved the working capital situation while cash proceeds from E&A has provided much needed liquidity comfort and ability to further repay the debt. We expect L&T to deliver standalone revenue CAGR of 12%, EBITDA CAGR of 11.8% and PAT CAGR of 15.1% in FY21- 23E. We value L&T on SoTP (base business at 20x FY23E EPS of | 52.6) basis with a target price of | 1700 (earlier | 1640) and maintain BUY rating.

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