Q2 Results Updates: L&T Expects Domestic Order Uptick In H2 FY25, Tata Power Profit Up 7% .

"domestic order uptick".

 

L&T (Larsen & Toubro)
: Domestic Order Uptick Anticipated in H2 FY25

Performance Summary

Larsen & Toubro (L&T) has showcased a robust Q2 performance in FY25, driven by continued growth in its core engineering and construction businesses. A significant contributor to this growth has been the government’s substantial focus on infrastructure development, which aligns with L&T's own ambitious expansion and diversification strategies. The company reported healthy revenue growth driven by order inflow from both domestic and international markets, with a specific outlook that the second half of FY25 will see a stronger demand for domestic orders.

Key Financial Highlights

1. Revenue: L&T’s consolidated revenue grew impressively, backed by successful project execution and increased order inflow across various sectors, including transportation, water, and power infrastructure.
2. Order Book: The company's order book hit new highs, showcasing the successful inflow of orders from government and private sectors alike. International orders formed a substantial part of the order book, contributing around 25% to the total, although the primary expectation remains that domestic orders will drive growth in H2.
3. Profitability: Margins in the core engineering and construction segment remained stable despite cost pressures. The cost management and operational efficiencies helped maintain these margins, underscoring L&T’s adaptability and resilience.

Key Segments and Future Outlook

L&T’s leadership has indicated that they are optimistic about the performance of key segments, such as:

• Infrastructure: Domestic demand in infrastructure is anticipated to rise with the government’s increasing investment in transportation, water supply, and affordable housing. L&T is a significant player in these areas, positioning it well to capitalize on the anticipated demand uptick in H2 FY25.
• Power and Renewable Energy: The company is moving towards expanding its green energy portfolio, a sector that is also drawing government attention. L&T’s diversification into renewable energy projects is expected to contribute positively to its future growth prospects.
• International Markets: Although the focus remains domestic, the company is actively seeking international projects, particularly in the Middle East and Africa, which have shown continued demand for L&T’s expertise.
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Strategic Focus for H2 FY25

For H2 FY25, L&T’s strategic focus will be directed at expanding its domestic order book through:

• Enhanced Project Execution: L&T plans to enhance its project execution timelines, which could significantly increase revenue from ongoing projects.
• Leveraging Digital Solutions: L&T’s push towards digital and automation technologies is aimed at improving efficiencies, which can be a critical factor in securing large-scale contracts and fulfilling complex infrastructure projects.

Tata Power: Profit Up 7% Driven by Strong Operational Performance

Financial Performance Overview

Tata Power posted a 7% year-on-year growth in profit for Q2 FY25, mainly driven by improved operational performance across its generation, transmission, and renewable energy businesses. This growth aligns with the company’s ongoing efforts to diversify its power portfolio, focusing increasingly on renewable energy while maintaining a robust position in the conventional power sector.

Key Financial Metrics

1. Revenue: Tata Power’s revenue saw a substantial boost, primarily attributed to improved efficiency and higher output from its renewable energy projects. Additionally, growth in consumer base across distribution companies (discoms) supported revenue.
2. Profit After Tax (PAT): PAT growth was positively impacted by increased power generation capacity, optimized generation mix, and operational cost efficiencies. The company’s cost-effective measures in power distribution and strategic focus on renewable projects contributed to this solid profit margin.
3. EBITDA Margin: Tata Power’s EBITDA margin improved, a result of its focus on reducing operational costs and enhancing the performance of its power plants and renewable energy projects.

Segmental Highlights

• Renewable Energy: Tata Power’s renewable energy arm has become a significant growth driver, with an increasing contribution to overall revenue. With recent project completions, the company’s total renewable capacity increased, supporting its green energy commitment.
• Power Generation and Transmission: Higher power demand and efficient plant management have boosted power generation, while the transmission segment has benefited from stable demand and regulatory support.
• Distribution: Tata Power has seen growth in its consumer base in various regions, particularly in Mumbai, Delhi, and Odisha. Expansion into new markets and increased investments in distribution infrastructure continue to be key priorities.

Strategic Initiatives and Future Focus

1. Expansion of Renewable Portfolio: Tata Power remains committed to its renewable energy targets, with ambitious plans to increase its renewable capacity significantly over the next five years. This focus aligns with the government’s push toward sustainable energy and positions Tata Power well to capture market share in the growing green energy sector.
2. Digitalization and Smart Metering: Investment in digital infrastructure, particularly in smart metering, has helped Tata Power improve operational efficiency and reduce losses. This digital transformation in distribution services aligns with Tata Power’s goal to improve consumer satisfaction and support load management.
3. Expansion in EV Charging Infrastructure: Tata Power has also been working on expanding its EV (electric vehicle) charging network across India, a sector that is expected to experience significant growth. This expansion supports Tata Power’s vision of becoming a leader in EV infrastructure, leveraging synergies within the Tata Group’s automotive division.

Challenges and Mitigation Strategies

Despite positive results, Tata Power faces challenges in terms of:

• High Fuel Prices: Rising fuel prices have affected the conventional power generation segment. Tata Power is working on optimizing its fuel mix and efficiency to mitigate this impact.
• Regulatory and Environmental Compliance: Tata Power continues to align with evolving regulatory requirements, focusing on cleaner energy and reducing carbon emissions, which are critical for long-term sustainability and compliance.

Market Outlook

With its robust Q2 performance and strategic initiatives in renewable energy, digital transformation, and EV infrastructure, Tata Power appears well-positioned to meet its growth targets in the coming quarters. The company is committed to capitalizing on the government’s renewable energy initiatives while addressing regulatory challenges and expanding its market footprint.

In conclusion, both L&T and Tata Power have demonstrated strong performance in Q2 FY25, leveraging domestic and renewable energy markets while focusing on operational efficiency and strategic growth. These companies are expected to benefit from India’s infrastructure growth story and energy transition efforts, making them attractive players for investors looking at sustainable and infrastructure-driven growth.