IGI Logo

Strong inflows

* LT reported a PAT of Rs17bn for Q1FY23, slightly below Street estimates on the back of lower EBITDA margins in the Infrastructure segment (6.5% vs. 7.1% in Q1FY22), largely due to higher commodity prices. Revenue was up 22% to Rs359bn, driven by 36%/30% growth in Infrastructure/IT segments.

* Order inflow (ex-services) stood at Rs280bn - up 85% YoY, though it was still marginally below the Q1FY20 level. Order prospects currently stand at Rs7.6tn and LT is hopeful of achieving its guidance of 12-15% growth as it has been selective in bidding. The order book at the end of the quarter stood at Rs3.6tn, with Infrastructure/Energy/Hi-Tech manufacturing segments contributing 73%/18%/5%.

* We maintain Buy with a Mar’24E TP of Rs1,960. LT’s core business currently trades at ~18x FY24E EPS. In a bid to improve profitability, LT is looking to exit its non-core assets such as IDPL and Nabha Power and also to cut stake in the Hyderabad metro.

* A decent quarter: LT reported 22% YoY sales growth for the quarter on the back of strong growth in Infrastructure (36%) and IT (30%) segments. Energy and Hi-Tech Engineering segments grew marginally by 3% each. The overall EBITDAM stood at 11% vs. 10.8% a year ago, while Infrastructure margin was lower at 6.5% vs. 7.1%, largely due to higher commodity prices. EBITDAM for Projects and Manufacturing stood at 8.2% vs. 8.8% a year earlier. FY22 EBITDAM for this segment stood at 9.2%. PAT, at Rs17bn, was up 45%, driven by higher revenue and lower taxes.

* Orders and prospects: The key positive in the quarter was order inflow (ex-services), which stood at Rs280bn (up 85% YoY) on better inflows in Infrastructure, Hydrocarbon and Defense segments. Order prospects for the rest of the year stood at Rs7.6tn. While this is lower than last year, LT has been selective in bidding and hence there is an expectation of a higher conversion ratio. In Q1FY23, tenders grew by 90% YoY and awards/tenders ratio improved to 70% from ~40% in Q1FY22.

*  Hyderabad metro and other non-core assets: LT is exploring an exit from Nabha Power and IDPL. LT’s subsidiary has signed a supplementary agreement for government assistance of Rs30bn (interest free) for the Hyderabad metro projects over the next two years. Q1FY23 ridership stood at 285,000 per day vs. 55,000 per day in Q1FY22.

* Guidance maintained: The company has maintained its order inflow growth/revenue growth guidance of 12-15% YoY. EBITDAM for Projects and Manufacturing has also been maintained at 9.5% for FY23.

* Valuation and outlook: We maintain Buy with a Mar’24E TP of Rs1,960. The core segment trades at ~18x FY24E EPS. The key risk is a delay in ordering.

To Read Complete Report & Disclaimer Click Here

Forn More Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354

Above views are of the author and not of the website kindly read disclaimer