L&T’s .5 8.5-trillion order book is healthy: analysts

Larsen & Toubro’s (L&T) potential order book for the current financial year stood at Rs 8.53 trillion, though 6% less than the previous fiscal year, which is seen by analysts as healthy. However, inflation could limit margin recovery, they said.

The internal share of these orders is Rs 6.31 trillion, while orders worth Rs 2.22 trillion are visible in the international market. The infrastructure division will likely form a lion’s share of Rs 5.72 trillion. These orders will be dispersed in water, of which 21% share, Power T&D 23%, Transport Infrastructure 19%, Building and Factories 16%, Heavy Civil 17% and Metallurgy and Material Handling 4%.

L & T’s order flow for FY22 was below the range indicated by the low to mid-teens, rising 10% to 1. 1.93 trillion as rewards activity slowed in the domestic market. L&T Chief Financial Officer R Shankar Raman said, “The pace at which tenders were awarded and awards were given the year before, when the government and all agencies were keen to revive the economy from the direct influence of Kovid. , Was missing this year. “

According to analysts at ICICI Securities, “Despite rapid tendering activity, award finalization was delayed because the sharp rise in product prices changed project cost estimates.” However, the current ex-service order book provides visibility of 3.5 trillion growth, they said.

L&T Management has forecast a 12-15% increase in revenue for FY23, and expects to recover some of the 100-basis-point margin decline in the year.

According to analysts, the inflationary environment will limit the company’s potential for margin disappointment in FY23 and its guidance reflects this. However, L & T’s guidelines for revenue growth among low- to middle-aged adolescents may be achievable. Due to strong order backlog, 98% of order backlog is running well.

Indian Belvedere also directed for a 12-15% increase in order inflows.
“The starting point is favorable with the government tender conversion ratio being 50% lower in FY22 versus 70% in FY21. This reflects a five-year low of 73% of the order backlog’s internal shares, “said analysts at Kotak Institutional Equities.

The company could invest Rs 6,000-7,000 crore in new growth in FY26. Of this, Rs 1,000 crore is on electrolyzers, Rs 2,000-2,500 crore on battery technology, Rs 2,000 crore on 90 MW capacity data centers, Rs 3,000-5,000 crore on digital platforms like Edutech and Balance on Green Energy. Agreement with Indian Oil (IOC).

“The focus of management is to have the light of resources and not to take up long term pregnancy projects in infrastructure and invest only in production. Hydrogen investment should be limited to tie-ups with IOC and below Rs 1,000-1,500 crore, ”said Jefferies analysts.