L&T - Research Report

 

L&T is an A /T+1group, Civil Construction company with having Face value of Rs. 2. Larsen & Toubro Ltd is a multinational conglomerate primarily engaged in providing engineering, procurement and construction (EPC) solutions in key sectors such as Infrastructure (46% of revenues), Hydrocarbon (12% of revenues), Power (3% of revenues), Defence (2% of revenues), Information Technology (21% of revenues) and Financial Services (~8% of revenues) in domestic and international markets. In FY22, Company’s Domestic sales accounted for 64% of total revenues, followed by USA & Europe ~18%, Middle East ~11%, and Rest of world ~7%. Company has a strong order book worth orders of Rs 60,710 crore at the group level during the quarter ended 31 December 2022, registering a growth of 21% over the corresponding quarter of the previous year. Its international orders amounted to Rs 15,294 crore during the quarter and comprised of 25% of the total order inflow and its consolidated order book of the group was at Rs 386,588 crore as on 31 December 2022, with international orders having a share of 26%.

 

Fundamentals (FY22-23):

 

CMP	Rs. 2348
52 - week high	Rs. 2,368.75
52 – week low	Rs. 1,456.80
Dividend % (consolidated)	0.93 %
ROCE	11.0 %
BVPS	691.01
Revenue	₹ 156521 Cr.
Debt to Equity	1.5
P/E ratio	33.1
EPS (consolidated)	Rs. 61.71
P/B ratio	3.43
Market Cap	Rs. 3,32,341 cr.
Face value	Rs. 2

 

Financial Results:

Company’s Net Sales was at Rs 46,389.72 crore in December 2022 up by 17.26%, Quarterly Net Profit at Rs. 2,552.92 crore in December 2022 up by 24.25% and EBITDA stands at Rs. 5,828.07 crore in December 2022 up by 14.24% as compared to December 2021.

Key Points:

 

1. Recently L&T launched three New Businesses i.e.  L&T EduTech which offers EdTech products and solutions to educational institutions, skilling bodies, working professionals, students, etc. and L&T SuFin – A B2B E-Commerce online platform which enables sellers to expand their sales reach, and for buyers to find their required products and services seamlessly.
2. Recently, the Minerals & Metals (M&M) Business of Larsen & Toubro (L&T) has secured two orders from the Vedanta Group which includes setting up a 5 LTPA Fertiliser Plant for Hindustan Zinc Limited (a Vedanta Group Subsidiary) at Chanderiya, Rajasthan and the capacity expansion of the Aluminum Smelter Complex at BALCO Korba, Chhattisgarh by 435 KTPA for Bharat Aluminium Company Limited (a Vedanta Group Subsidiary).
3. Company has entered into an Electrolyzer Manufacturing Binding Agreement with McPhy Energy, a France-based leading electrolyzer technology and manufacturing company to explore the opportunities unfolding in the emerging Green Hydrogen market.  Under this partnership, McPhy will grant an exclusive license of its pressurised alkaline electrolyzer technology to L&T for manufacturing of electrolyzers, including future product upgrades. L&T plans to set up a Gigawatt-scale manufacturing facility for electrolyzers based on McPhy technology in India to serve the domestic requirements as well as cater to the other selected geographies.
4. Company recently signed MoU with the Norway-based H2Carrier (H2C) for developing floating green ammonia projects for industrial-scale applications with an aim to decarbonise the global economy. H2C plans to build the P2XFloater™ hull at yards in Asia and L&T will design and fabricate the topside process and utility modules to produce Green Hydrogen & Green Ammonia, including Electrolysers, Nitrogen Generation plant, and Ammonia Synthesis unit.
5. L&T bags an order from IOCL for setting up a Residue Hydrocracker Unit (RHCU) for its Panipat Refinery Expansion (P-25) Project which will enhance refining capacity of the plant from 15 MMTPA to 25 MMTPA. Other than that, Larsen & Toubro Ltd (L&T) and Megha Engineering & Infrastructures Ltd (MEIL)’s consortium secured jobs worth Rs 14,000 crore to build the ambitious Thane-Borivali twin tunnel project in Mumbai.
6. Taking a bigger step towards Green hydrogen production the commissioned its first Green Hydrogen Plant at its AM Naik Heavy Engineering Complex in Hazira, Gujarat. The plant will produce 45 Kg of Green Hydrogen daily, which will be used for captive consumption in the company’s Hazira manufacturing complex.  
7. L&T Construction Equipment Limited (LTCEL), a 100% subsidiary of L&T recently dispatched the first batch of 25 special variant Wheel Loaders that are suitable for operation in harsh terrains – high altitudes and extreme weather conditions to the Border Roads Organisation (BRO).
8. Company’s 12.19 m dia Slurry TBM (Tunnel Boring Machine), named ‘Mavala’, had achieved a world record for monthly lengths by excavating 456.72 m at the prestigious Mumbai Coastal Road Project which showcases the company’s capabilities in Infra projects. Similarly, the company also set a new benchmark by building a 12-storey residential tower with 96 flats in just 96 days.
9. Larsen & Toubro (L&T) has also signed an agreement with the Indian Institute of Technology Bombay to jointly pursue research and development work in the Green Hydrogen value chain.  
10. IndianOil, L&T and ReNew formed JV for development of Green Hydrogen Business with equal stake in it by all the three companies. Company has also signed a separate JV with IOCL to manufacture Electrolyzers. Both JVS will enable India’s transition from a grey hydrogen economy to a greener one under Aatmanirbhar Mission and Green Hydrogen Policy announced by GOI.

 

In last 1 years the stock gave a return of 90.63% as compared to the rise of Sensex and Nifty in the same period.

L&T has been named the ‘Second Strongest Brand’ among the top 50 Global Engineering and Construction (E&C) companies – by Brand Finance, the world’s leading brand valuation consultancy and not just that it has also been ranked the ‘Third Fastest Growing Brand’ by the London-based consultancy in its ‘Engineering & Construction 50 – 2022’ report.

The energy industry is undergoing a tectonic shift with Green Hydrogen emerging as a key fuel in the future energy basket and company’s newly established plant and its JV with IOCL and Renew will play a major role in the journey and will showcase good impact on its financials in future. Company with its footprint across 50 countries has gained 44% in its Brand Value over last year and it has been maintaining a healthy dividend payout of 35.3% which makes it more attractive amongst investors to add in their portfolio. Considering company’s fundamentals, strong order book in India as well as overseas, good financial performance and its foray into new businesses, investors looking for safe investments and healthy returns in upcoming years can add this company in their portfolios for long term period.

HET ZAVERI

info@smartinvestment.in

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