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Our view

L&T reported a mixed set of numbers with 10% YoY revenue growth on the back of decent performance of the Hi-Tech Manufacturing, Energy Projects and IT&TS business. During 4Q, the company recorded OI of Rs761bn, up 3% YoY on a high base led by large order wins from sectors such as Public Spaces, Hydel & Tunnels, Irrigation Systems, Ferrous Metals, Oil & Gas, Power Transmission & Distribution and Defence. Order Book stands at all-time high of Rs4trn (2.2x TTM revenues) providing a strong revenue visibility for next 2-3 years. Management indicated that order pipeline for FY24 stands healthy at ~Rs9.73trn with good traction witnessed in sectors such as Metros/RRTS/HSR, Roads and Expressways, Water, Renewables, Non-Ferrous Metals and Power T&D. On the international front, with pickup in economic activity in GCC led by high crude prices, management is witnessing good traction in order inflows in both oil and non-oil segments

We believe that L&T is well-placed to emerge stronger given its financial, technical & managerial capability for sustaining and gaining market share. At CMP, the stock is trading at 26.6x/20.8x FY24E/FY25E earnings. We remain positive on the company’s strong business model, robust bid pipeline, diversified order book and healthy balance sheet. We maintain our ADD rating a revised SOTP-based TP of Rs2,654.

Result Highlights

* Consolidated sales came in at ~Rs583.3bn (up 10% YoY; YSL estimate of ~Rs584.8bn) driven by revenue growth across segments such as Infrastructure (up 4% YoY), IT&TS (up 22% YoY), Hi-Tech Manufacturing (up 25% YoY) and Energy Projects (up 17% YoY)

* Owing to below-expected gross margin, EBITDA came in below estimates at Rs68.3bn (YSLe ~Rs72.8bn) with EBITDA margins coming in at 11.7% (~60bps YoY contraction)

* Adj PBT came in at Rs59.1bn (up 6% YoY), on the back of a 15% YoY increase in interest cost. Depreciation was up 11% YoY while other income grew 44% YoY

* During the quarter, Adj PAT grew 10% to Rs39.9bn (YSLe ~Rs40.2bn)

* Order inflows grew by 3% YoY to Rs761bn in 4QFY23 driven by order wins in Public Spaces, Hydel & Tunnels, Irrigation Systems, Ferrous Metals, Oil & Gas, Power Transmission & Distribution and Defence sectors. International orders constituted 47% of total OI

* Order book stands at a record ~Rs3.99trn, up 12% YoY as on 4QFY23

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