Street cheers on L&T’s Q2 performance; stock gain 3%

The operating performance of its core business was aided by operating leverage, driving sequential EBITDA margin growth of 30 basis points to 9.2%. Ebitda is short for earnings before interest, taxes, depreciation and amortization. One basis point is one hundredth of a percentile.

However, there was disappointment on the execution front as it faced disruptions in international supply chain disruptions, changes in the labor mix and cyclone Tauka affecting Maharashtra and Gujarat. However, the company’s management said that it has reached 260,000 labor availability at present and is well on track to deliver pre-covid levels of execution.

Meanwhile, its order book grew 11% year-on-year in Q2FY22 ₹3.2 times with a 3.3 trillion order book/revenue ratio. Overall order flow increased 50% year over year ₹42,100 crores. In the post-earnings conference call, management indicated a healthy prospect pipeline of Rs 6.83 trillion, up 12% year over year. It is spread domestically and internationally. It further said that the prospects for the infrastructure segment order are steep ₹5.3 trillion spread across buildings and factories, heavy civil, transportation, water, electricity T&D. Hydrocarbon prospects stand out ₹1.2 trillion with a significant proportion from international geographies, the management said.

So far this year, the stock has climbed 42%, leaving behind Nifty 50’s 21% return. Analysts said going forward, apart from the trajectory of order inflows, comments on monetization of non-core assets will be crucial for L&T stock. The company’s management said it is continuously exploring offloading stake in Nabha Power and IDPL. In addition, it expects some closure on Hyderabad Metro refinancing by March 2022.