Log in
Show password
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Dynamic quotes 
  1. Homepage
  2. Equities
  3. India
  4. Bombay Stock Exchange
  5. Larsen & Toubro Limited
  6. News
  7. Summary
    500510   INE018A01030


End-of-day quote. End-of-day quote Bombay Stock Exchange - 09/21
1718.1 INR   +0.84%
03:28aLARSEN & TOUBRO : Commissions Alumina Refinery Expansion Project for Hindalco Unit
09/21Indian Benchmarks Reverse Loss on Tuesday; JSW Steel Jumps 6%
09/21LARSEN & TOUBRO : Arm Bags Two New Orders
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector news

Larsen & Toubro : Earnings Call Transcripts Q1FY22

07/30/2021 | 07:59am EDT

"Larsen & Toubro Limited Q1 FY22 Earnings

Conference Call"

July 26, 2021


Page 1 of 20

Larsen & Toubro Limited

July 26, 2021

Moderator:Ladies and gentlemen, good day and welcome to the Larsen & Toubro Limited Q1 FY22 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing '*' then '0' on your touchtone telephone. Please note that this conference is being recorded.

I now hand the conference over to Mr. P. Ramakrishnan, Head-Investor Relations, Larsen & Toubro Limited. Thank you and over to you, sir.

P. Ramakrishnan: Thank you. Good day ladies and gentlemen. A very warm welcome to all of you into the L&T Q1 FY22 Earnings Call. The analyst presentation was uploaded on the stock exchange at our website today around 6:40pm. Hope you must have had a quick look at the numbers. Instead of taking you through the entire presentation, I will give you a brief overview of the performance of the company in the first 15-20 minutes, post which we will get into Q&A.

Before I begin with the overview, a brief disclaimer. The presentation which we have uploaded on the stock exchange, and our website today, including our call discussions that will happen now contains or may have certain forward-looking statements concerning our business prospects and profitability, which are subject to several risks and uncertainties and the actual results could materially differ from those in such forward-looking statements.

Coming to the overview, in the first quarter of the current financial year, India remained in the throes of a severe second COVID wave. The proliferation of infections was much faster than the first wave with significantly higher fatalities recorded. The fast pace of transmission put pressure on the healthcare systems across various states in the country. Unlike the national lockdown being announced last year, which resulted with sufficiently higher economic cost, this time around we have witnessed regional local lockdowns in order to curtail the rising infections.

Furthermore, several states imposed restrictions on discretionary services in order to limit the spread of the virus. Fortunately, India's second wave abated faster than initially feared, though concerns remain around the risk of future waves. Since vaccination programs have commenced in full swing, we hope the economic impact in the coming quarters will be insignificant. Coming to the company performance, Q1 FY22 was all about navigating against the COVID tide in difficult times. Our order inflows for Q1 FY22 at Rs. 266 billion, registered a growth of 13% over the corresponding quarter of the previous year.

The international orders constituted 34% of the total order inflow. Excluding of services and concessions, our order inflows in Q1 FY22 are Rs. 151 billion registering a growth of 10% over the quarter of the previous year. The order wins again excluding services and concessions are fairly well spread across Infrastructure, Hydrocarbon, Power, Heavy Engineering and Industrial Machinery businesses. Having said that, let me mention here that ordering momentum in Q1 was impacted by subdued tendering and award activity.

Page 2 of 20

Larsen & Toubro Limited

July 26, 2021

On a sequential basis, the project tenders and awards in Q1 FY22 were down 40% and 60% respectively. On a YoY basis, the same was 20% and 25% down with respect to tenders and awards. On a positive note, our prospects pipeline for the remaining nine months of the current financial year, is pegged at Rs. 8.96 trillion as against Rs. 9.06 trillion at the beginning of the current financial year.

The order book at Rs. 3.23 trillion is at near record high levels.A large and a diversified order book provides us multiyear revenue visibility currently having an average execution cycle of around 27 months. Currently, 80% of our order book is domestic and 20% is international. Within international, around 60% of the order book comes from Middle East and the remaining 40% from Africa and Southeast Asia. 89% of our total order book comprises of Infrastructure and Hydrocarbon, with Infrastructure having 76% and Hydrocarbon having 13% share. Within Infrastructure, our order book is well spread out across the various businesses like Heavy Civil, Water, Buildings & Factories, Power Transmission & Distribution, Transportation Infrastructure and Minerals & Material Handling. The composition of the domestic order book, which today is 80% of the overall order book comprises of central government share at 9%, state government at 31%, public sector corporations at 43% and private sector at 16%.

Coming to revenues, our revenues for Q1 FY22 at Rs. 293 billion registered a growth of 38% over a low base of Q1 FY21. International revenues constituted 38% of the revenues during the quarter. This was despite the project progress in Q1 FY22 being impacted by regional lockdowns, intermittent supply chain disruptions, a below optimum labor force and shortage of industrial oxygen. Some of these factors impacted manufacturing and site execution.

Our revenues excluding the services and concessions business at Rs. 179 billion for Q1 FY22 has registered a growth of 57% over the quarter of the previous year. Let me also mention here that in Q1 FY22, we have caught up to the revenues of Q1 FY20, thanks to the healthy portfolio mix of EPC projects, manufacturing and service businesses.

The group level EBITDA margins at 10.8% for Q1 FY22 is 320 bps higher than Q1 FY21, primarily due to improved overhead recovery. EBITDA margin excluding the services and concessions business has improved from 6.5% in Q1 FY21 to 8.9% in Q1 FY22, attributed to higher overhead recoveries despite input cost headwinds. The details on EBITDA margin are given in the annexures to the analyst presentation. As guided in our previous call that we had on 15th May, we will endeavor to maintain our core business margins at the same level that we printed for FY21. Our current composition of variable price contracts, jobs that are expected to cross margin recognition threshold in the current year, cost contingency releases for jobs that are near completion, overhead optimization initiatives, enhanced productivity through various digitization programs, value engineering and wastage control initiatives, negotiation with some of our key vendors and discussions with clients on use of alternate varieties of inputs should hopefully see us through in terms of managing costs headwinds during the current year.

Coming to PAT, our overall PAT for Q1 FY22 is at Rs. 12 billion as compared to Rs. 3 billion in Q1 FY21. This is largely due to the stabilization of operations in the current year as compared

Page 3 of 20

Larsen & Toubro Limited

July 26, 2021

to the corresponding quarter of the previous year. Anyway, Q1 FY21 would not be a right reference point for comparison because a major part of the Q1 of the previous year was affected due to the national lockdown. However, if we compare our PAT with Q1 FY20, that is the year prior to FY21, you will notice that our overall PAT in Q1 FY20 was Rs. 15 billion vis-à-vis Rs. 12 billion in the current quarter. Both Metro operations and the Financial Services business have been disproportionately impacted by COVID. Had this not happened for these one offs, our Q1 FY22 PAT should have been higher.

Coming to working capital, our Net Working Capital to Sales ratio has improved from 26.8% in Q1 FY21 to 22.9% in Q1 FY22. One of the reasons for improvement in NWC to Sales is due to the denominator, that is the revenues moving higher. Having said that, let me mention here that our customer collections have improved in the current quarter over the comparable quarter of the previous year. Our group level collections in Q1 FY22 were at approximately Rs. 276 billion vis-à-vis Rs. 252 billion of Q1 FY21. Let me also mention here, that on a sequential basis, our NWC to Sales ratio has marginally worsened from 22.3% in Mar'21 to the current level of 22.9% in Jun'21. This is primarily due to release of supply chain payments that fell due in the current quarter. If you could glance through our Cash Flow Statement, given as part of the annexures to the analyst presentation, our net cash from operations is a minor negative at Rs. 7.9 billion. In summary, we have been able to preserve our cash levels in a predicted and a seasonally weaker quarter. As mentioned in the previous earnings call, we will again endeavor to maintain our NWC to sales ratio for the full year at around the Mar'21 levels, which was around 22.3%.

Pursuant to the repayment of liabilities in our financial services business, power development business and to some limited extent at the L&T parent entity during the current quarter, our group level gross debt to equity and net debt to equity levels have improved in the current quarter as compared to the quarter of the previous year. The details are mentioned in the balance sheet page that is attached as part of the annexures to the analyst presentation. Finally, our trailing 12- month ROE is at 17.2% in Q1 FY22 vis-a-vis 12.7% in Q1 FY21. The trailing 12-month ROE for Q1 FY22 also includes gain on the divestment of the E&A business that happened in Aug' 2020. Suffice to say the return ratios internally are being pursued very rigorously. Going forward, a robust business portfolio, focus on cash generation and distribution and the progressive divestments of some parts of our business portfolio should hopefully get us there.

The group performance P&L stack is available in the analyst presentation and the major variations have been explained. You may kindly go through the same. Very briefly I will comment on the performance of each of the segments before we conclude on the environment and outlook.

Coming to infrastructure, order inflows at Rs. 110 billion in Q1 FY22 is well spread out across the various sub segments.Let me mention here that during Q1, we did witness pandemic induced delay in tendering and award activities. Our order prospects pipeline for the remaining nine months of the year for the infrastructure segment remains very healthy at Rs. 6.4 trillion, up by 33% as compared to Jun' 20. Order book in the segment at Rs. 2.45 trillion as on 30-Jun-21 is quite healthy. Revenues for the current quarter at Rs. 104.1 billion registered a strong growth

Page 4 of 20

Larsen & Toubro Limited

July 26, 2021

over the corresponding quarter of the previous year despite the COVID second wave challenges. Consequent to a better job mix and as I said earlier, a higher recovery of overheads, our EBITDA margins in this segment improved from 6.3% in Q1 FY21 to 7.1% in the current quarter, despite commodity price inflation affecting input costs.

Going to Power, the receipt of a flue gas desulfurization order in Q1 FY22, boosted the existing large order book in this segment. Revenues for Q1 FY22 at Rs. 7.6 billion is up more than 100% with various projects in the order book gaining execution momentum. Better execution progress drives the margin recovery in the current quarter. As you may be aware, the profits of the manufacturing part of the EPC power business, i.e. the Boiler and Turbine business and the other Power JV companies are consolidated at PAT level under the equity method of accounting.

After that, I come to Heavy Engineering. Again, in this quarter, this segment had multiple order wins in the refinery, oil and gas verticals. Revenues for the quarter at Rs. 5.5 billion registered a growth of 45% over Q1 of the previous financial year. On account of improved execution across multiple jobs, their margins also consequently improved in the current quarter.

Coming to Defence, we believe the policy pronouncements and the recent indigenization drive of the government will drive order inflows in the segment in the medium to long term. Revenues for Q1 FY22 at Rs. 6.9 billion is up 46% on better job progress. Q1 FY22 margins for this segment was contributed by cost savings and contingency releases in certain jobs. At this stage, I would like to reiterate that this defense engineering business does not manufacture any explosives nor ammunition of any kind, including cluster munitions or anti-personnel landmines or nuclear weapons or components for such munitions. This business also does not customize any delivery systems for such munitions.

We come to Hydrocarbon segment. This segment had subdued order inflows in Q1 FY22 as we did face elevated levels of competitive intensity. Having said that, I wish to mention here that due to lower levels of ordering witnessed in the business since the second half of FY20, the prospects pipeline has significantly improved largely due to the recent pickup in oil prices. Our prospects pipeline in this segment for the balance 9 months of the current year is at Rs. 1.82 trillion which is significantly higher than Rs. 668 billion at the end of Q1 of last year. Revenues for the current quarter at Rs. 41.9 billion is up by 37% over Q1 of FY21. The strong execution activity drive revenues in the current quarter. Secondly, Q1 EBITDA margin improvement is aided by cost savings and a one-time claim.

Moving to development project. This segment includes the Power Development business portfolio of two operating assets, a 1,400-megawattcoal-based power plant in the state of Punjab, and a 99-megawatt hydel based plant operating in Uttaranchal. Besides these two assets, we also operate and report under this segment the Hyderabad Metro. The roads and the transmission line concession part of L&T Infrastructure Development Projects (L&T IDPL) is consolidated at PAT level under the equity method of accounting.

Page 5 of 20

This is an excerpt of the original content. To continue reading it, access the original document here.


Larsen & Toubro Limited published this content on 30 July 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 July 2021 11:58:29 UTC.

ę Publicnow 2021
03:28aLARSEN & TOUBRO : Commissions Alumina Refinery Expansion Project for Hindalco Unit
09/21Indian Benchmarks Reverse Loss on Tuesday; JSW Steel Jumps 6%
09/21LARSEN & TOUBRO : Arm Bags Two New Orders
09/20Larsen & Toubro Unit to Build Two LNG Tanks for Dahej Expansion Project in Gujarat, Ind..
09/07LARSEN & TOUBRO : Construction Arm Bags Water Supply Contract
09/07L&T Construction Wins Contract for Its Water Effluent Treatment Business
09/01LARSEN & TOUBRO : L&T concludes the divestment of 99 MW Hydro Power Plant with Renew Power
09/01LARSEN & TOUBRO : L&T-owned Nabha Power wins Twin Awards at CII Energy Efficiency Summit 2..
08/31L&T Announces Hyderabad Metro, Nabha Power Plant and L&T IDPL Sale
08/31LARSEN & TOUBRO : Completes Sale of Hydroelectric Power Project in Uttarakhand, India
More news
Analyst Recommendations on LARSEN & TOUBRO LIMITED
More recommendations
Sales 2022 1 566 B 21 199 M 21 199 M
Net income 2022 96 354 M 1 304 M 1 304 M
Net Debt 2022 1 122 B 15 193 M 15 193 M
P/E ratio 2022 25,0x
Yield 2022 1,32%
Capitalization 2 403 B 32 571 M 32 532 M
EV / Sales 2022 2,25x
EV / Sales 2023 1,98x
Nbr of Employees 40 253
Free-Float 86,0%
Duration : Period :
Larsen & Toubro Limited Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends LARSEN & TOUBRO LIMITED
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus BUY
Number of Analysts 36
Last Close Price 1 718,10 INR
Average target price 1 899,17 INR
Spread / Average Target 10,5%
EPS Revisions
Managers and Directors
Sekharipuram Narayan Subrahmanyan Chief Executive Officer, MD & Executive Director
Ramamurthi Shankar Raman Chief Financial Officer & Executive Director
Anil Kumar Manibhai Naik Group Non-Executive Chairman
A. Sivaram Nair Secretary & Compliance Officer
Mukund Manohar Chitale Independent Non-Executive Director
Sector and Competitors