The reason being, lockdown is not an unchartered territory anymore now and
management revenue growth guidance assume routine economic activity from
July-21, which will further improve in H2 as witnessed in lockdown-1. As
per LT, weak ordering of FY21 is expected to get a fillip in FY22, as the pipeline of tenders has improved in the last 12 months.
The balance sheet has
improved in FY21 and LT guides for ROE of 18% in the next 2-3 years. Apart
from capital infusion in loss-making Hyderabad metro, LT is not visualizing the incremental funding requirement for any of its subsidiaries and aims to
reward shareholders by dividends.
For FY21, including special dividend (of
Rs18) it has paid a dividend of Rs36/sh. Dividend payout excl. the special
dividend has increased to 37% in FY21 vs 28% in FY20. We do not have a rating
on the stock and LT trades at 16x FY23E consolidated consensus EPS (which
is the average of its last 10 year mean).
Other Conference call takeaways:
Other Conference call takeaways:
Margin: Q4FY21 L&T standalone gross margin improved YoY and EBITDA margin
ex services increased YoY by 80bps in Q4 to 13% and 40bps YoY increased in
FY21 to 10.4%. LT's 60% of contracts have price variation clauses and
margin improvement is led by automation, change in job mix and efficiency /
cost management. LT guides for 8-10% EBITDA margin for EPC, manufacturing
at 10-12% and thus blended margin of ~10%.
Labor availability: Labour at the end of FY21 was around 240k but in May-21it was 130k. Q4 is peak in terms of execution and labor requirement. And Q1weakness in labor at site is led by seasonal weakness and covid relateddisruption at the sites.
FY22 Guidance: Revenue and order inflow growth guidance by LT is at 13-15%YoY. This includes company's expectation of COVID peaking in May-21,activity to normalize from Q2FY21. And risk would be extension of thecurrent wave of COVID beyond June-21.
Ordering Status: LT mentioned that the order inflow was -12% YoY at Rs506bnin Q4FY21, and is led by deferment of awards by the government. InFY21order inflow was lower by 6% YoY. But despite lower inflow, Order bookat Rs3.3t is one of the highest and equals to 2.4x FY21 revenue.
Order opportunity: LT is seeing higher prospect pipeline of Rs9.6tncurrently versus Rs8.35tn in FY20 end. In this, domestic is 67% andremaining is international. Sector wise, share of Infra is 77% and
hydrocarbon is 16%. Client wise, private sector opportunity is still weak.
Dividend Guidance: LT announced dividend of Rs18/sh and thus includingspecial dividend, dividend for FY21 is at Rs36/sh. In FY20, dividendpayment was Rs18/sh. LT mentioned buyback is not possible due to regulationand thus its looking to reward shareholder by higher dividends. Fromcapital allocation point of view, LT guided only Rs10-20bn per requirementfor Hyd Metro and remaining is kept for growth, higher dividends.
ROE target at 18%: Company has closed FY21 with ROE of 15%+ and is aimingto reach 18% in the next 3 years. This will be driven by selling Nabhapower, sale of Hyderabad Metro, working capital management and overallimproved execution. L&T working capital days as % to revenue, is lower in
FY21 at 22% vs 24% in FY20 and is led by government timely release ofpayments.
ESG Framework: MSCI has rated LT at BB category (up from B) and companyhighlighted that its defense business is not producing landmines or clusterbomb. Company is into precision engineering and shouldn't be seen asDefense Company.
Labor availability: Labour at the end of FY21 was around 240k but in May-21it was 130k. Q4 is peak in terms of execution and labor requirement. And Q1weakness in labor at site is led by seasonal weakness and covid relateddisruption at the sites.
FY22 Guidance: Revenue and order inflow growth guidance by LT is at 13-15%YoY. This includes company's expectation of COVID peaking in May-21,activity to normalize from Q2FY21. And risk would be extension of thecurrent wave of COVID beyond June-21.
Ordering Status: LT mentioned that the order inflow was -12% YoY at Rs506bnin Q4FY21, and is led by deferment of awards by the government. InFY21order inflow was lower by 6% YoY. But despite lower inflow, Order bookat Rs3.3t is one of the highest and equals to 2.4x FY21 revenue.
Order opportunity: LT is seeing higher prospect pipeline of Rs9.6tncurrently versus Rs8.35tn in FY20 end. In this, domestic is 67% andremaining is international. Sector wise, share of Infra is 77% and
hydrocarbon is 16%. Client wise, private sector opportunity is still weak.
Dividend Guidance: LT announced dividend of Rs18/sh and thus includingspecial dividend, dividend for FY21 is at Rs36/sh. In FY20, dividendpayment was Rs18/sh. LT mentioned buyback is not possible due to regulationand thus its looking to reward shareholder by higher dividends. Fromcapital allocation point of view, LT guided only Rs10-20bn per requirementfor Hyd Metro and remaining is kept for growth, higher dividends.
ROE target at 18%: Company has closed FY21 with ROE of 15%+ and is aimingto reach 18% in the next 3 years. This will be driven by selling Nabhapower, sale of Hyderabad Metro, working capital management and overallimproved execution. L&T working capital days as % to revenue, is lower in
FY21 at 22% vs 24% in FY20 and is led by government timely release ofpayments.
ESG Framework: MSCI has rated LT at BB category (up from B) and companyhighlighted that its defense business is not producing landmines or clusterbomb. Company is into precision engineering and shouldn't be seen asDefense Company.
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