Kya L&T खरीदने का सही समय है? L&T Big Upside? L&T Stock Anlalysis - Buy or Sell.

L&T Weak parts of guidance do not come as a big surprise
L&T reported a 4% miss in core E&C EBITDA, with group-level RoE print of
15%, which surprised on the positive. It expects the weak margin to sustain
and the good working capital situation to cease. L&T’s expectation of a
meaningful decline in overseas ordering does not come as a surprise to us.
(1) strong resurgence in domestic ordering, after a muted 1H and (2) L&T gaining
a share on government bids, incorporating a quality-based cost assessment.

4% miss in core E&C EBITDA; standalone infra margin still down 100 bps
4Q results were weak, with core E&C revenues/EBITDA up 17%/22% yoy.
EBITDA margin of 9.6% grew a modest 40 bps yoy on a low base and would
have been down by a similar quantum, if not for the sharp uptick seen in the
infra segment’s subsidiaries—standalone infra segment’s EBIT margin declined
100 bps yoy. The margin was also supported by a positive boost of realty sales.
An 8% lower yoy ordering led to a 19% higher and flat qoq order backlog.
Working capital eased to 12% of sales, leading to a 15% RoE for the full year.
L&T has meaningfully outperformed on guidance of full-year revenue growth
(25%) and ordering (31%), while undershooting on margin guidance.

Flat core margin guidance weak; overseas ordering guidance of 25%+ decline
L&T has guided for core E&C margin sustaining at 8.25% for FY2025 levels in
sharp contrast to the 9% guidance a year ago for FY2024. The same is
attributable to a combination of (1) higher 38% share of overseas in order
backlog (from 28%), (2) an increase in input costs due to higher procurement
cost (geopolitical uncertainty) and shortage of labor in the Middle East and (3)
difficulty in getting claims settled. L&T also expects the current 12% working
capital to sales ratio to weaken to 15% in FY2025 and the absence of any
meaningful asset sale, hinting at RoE moving back to low teens levels. Its order
inflow growth guidance of 10% appears aggressive against its expectations of
overseas order inflows decline high-teens yoy and large part of the remaining
half of order inflows (domestic) seeing a weak first half due to elections. The
implied growth for the domestic orders is hinged on a combination of strong
revival in ordering in 2H and L&T gaining share on expectation of government
entities moving toward quality-based cost assessments, while bidding projects.

Healthy pipeline. L&T shared an order prospects pipeline of Rs12 tn, up 24% yoy or up mid-teens
adjusted for revision in order prospects pipeline in 1HFY24. The order pipeline consists of Rs7.25 tn from the infrastructure segment, Rs3.87 tn from the Hydrocarbon segment, a modest Rs0.5 tn from the Power segment, Rs0.35 tn from the High-tech Manufacturing segment and Rs0.1 tn from the Green Energy segment. The split of the infrastructure segment order pipeline is as follows: (1) Water at 21%, power T&D and renewable at 21%, transportation infrastructure at 20%, buildings and factories at 14%, heavy civil infrastructure at 17%, and minerals and metals at 7%.


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