L&T 2020-21 Annual Report Analysis

Wed, 31 Mar

L&T has announced its results for the year ended March 2021. Let us have a look at the detailed performance review of the company during FY20-21.

L&T Income Statement Analysis

• Operating income during the year fell 1.8% on a year-on-year (YoY) basis.
• The company's operating profit increased by 22.0% YoY during the fiscal. Operating profit margins witnessed a fall and down at 19.0% in FY21 as against 15.3% in FY20.
• Depreciation charges increased by 17.9% and finance costs increased by 7.0% YoY, respectively.
• Other income grew by 23.5% YoY.
• Net profit for the year grew by 19.3% YoY.
• Net profit margins during the year grew from 7.2% in FY20 to 8.7% in FY21.

L&T Income Statement 2020-21

No. of Mths Year Ending		12 Mar-20*	12 Mar-21*	% Change
Net Sales	Rs m	1,510,194	1,482,926	-1.8%
Other income	Rs m	49,611	61,248	23.5%
Total Revenues	Rs m	1,559,805	1,544,174	-1.0%
Gross profit	Rs m	230,848	281,716	22.0%
Depreciation	Rs m	24,623	29,042	17.9%
Interest	Rs m	112,695	120,597	7.0%
Profit before tax	Rs m	143,142	193,325	35.1%
Tax	Rs m	34,919	64,256	84.0%
Profit after tax	Rs m	108,223	129,069	19.3%
Gross profit margin	%	15.3	19.0
Effective tax rate	%	24.4	33.2
Net profit margin	%	7.2	8.7

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L&T Balance Sheet Analysis

• The company's current liabilities during FY21 down at Rs 1,374 billion as compared to Rs 1,447 billion in FY20, thereby witnessing an decrease of -5.1%.
• Long-term debt down at Rs 821 billion as compared to Rs 823 billion during FY20, a fall of 0.3%.
• Current assets rose 7% and stood at Rs 1,950 billion, while fixed assets fell 7% and stood at Rs 1,136 billion in FY21.
• Overall, the total assets and liabilities for FY21 stood at Rs 3,086 billion as against Rs 3,043 billion during FY20, thereby witnessing a growth of 1%.

L&T Balance Sheet as on March 2021

No. of Mths Year Ending		12 Mar-20*	12 Mar-21*	% Change
Networth	Rs m	663,217	754,849	13.8
Current Liabilities	Rs m	1,447,292	1,374,080	-5.1
Long-term Debt	Rs m	823,313	821,200	-0.3
Total Liabilities	Rs m	3,042,936	3,085,767	1.4
Current assets	Rs m	1,826,899	1,949,668	6.7
Fixed Assets	Rs m	1,216,037	1,136,099	-6.6
Total Assets	Rs m	3,042,936	3,085,767	1.4

L&T Cash Flow Statement Analysis

• L&T's cash flow from operating activities (CFO) during FY21 stood at Rs 228 billion, an improvement of 241.3% on a YoY basis.
• Cash flow from investing activities (CFI) during FY21 stood at Rs -54 billion on a YoY basis.
• Cash flow from financial activities (CFF) during FY21 stood at Rs -153 billion on a YoY basis.
• Overall, net cash flows for the company during FY21 stood at Rs 21 billion from the Rs 47 billion net cash flows seen during FY20.

L&T Cash Flow Statement 2020-21

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-20	Mar-21
Cash Flow from Operating Activities	Rs m	66,939	228,441	241.3%
Cash Flow from Investing Activities	Rs m	-82,563	-54,288	-
Cash Flow from Financing Activities	Rs m	63,716	-152,744	-
Net Cash Flow	Rs m	46,577	21,391	-54.1%

Current Valuations for L&T

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 91.9, an improvement from the EPS of Rs 77.1 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 1,418.4, stands at 42.7 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 2.6 times, while the price to sales ratio stands at 1.3 times.
• The company's price to cash flow (P/CF) ratio stood at 10.5 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-20*	12 Mar-21*
Sales per share (Unadj.)	Rs	1,075.7	1,055.8
TTM Earnings per share	Rs	77.1	91.9
Diluted earnings per share	Rs	77.0	91.9
Price to Cash Flow	x	8.5	10.5
TTM P/E ratio	x	11.3	42.7
Price / Book Value ratio	x	2.4	2.2
Market Cap	Rs m	1,591,873	1,654,566
Dividends per share (Unadj.)	Rs	18.0	36.0

Ratio Analysis for L&T

• Solvency Ratios

Current Ratio: The company's current ratio improved and stood at 1.4x during FY21, from 1.3x during FY20. The current ratio measures the company's ability to pay short-term and long-term obligations.

Interest Coverage Ratio: The company's interest coverage ratio improved and stood at 2.6x during FY21, from 2.3x during FY20. The interest coverage ratio of a company states how easily a company can pay its interest expense on outstanding debt. A higher ratio is preferable.

• Profitability Ratios

Return on Equity (ROE): The ROE for the company improved and stood at 17.1% during FY21, from 16.3% during FY21. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

Return on Capital Employed (ROCE): The ROCE for the company improved and stood at 19.9% during FY21, from 17.2% during FY20. The ROCE measures the ability of a firm to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company improved and stood at 8.1% during FY21, from 7.3% during FY20. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-20*	12 Mar-21*
Current ratio	x	1.3	1.4
Debtors’ Days	Days	10	10
Interest coverage	x	2.3	2.6
Debt to equity ratio	x	1.2	1.1
Return on assets	%	7.3	8.1
Return on equity	%	16.3	17.1
Return on capital employed	%	17.2	19.9

To see how L&T has performed over the last 5 years, please visit here.

L&T Share Price Performance

Over the last one year, L&T share price has moved up from Rs 806.9 to Rs 1,418.4, registering a gain of Rs 611.5 or around 75.8%.

Meanwhile, the S&P BSE CAPITAL GOODS Index is trading at Rs 21,095.8 (down 0.4%). Over the last one year it has moved up from 10,979.5 to 21,095.8, a gain of 10,116 points (up 92.1%).

Overall, the S&P BSE SENSEX is up 74.1% over the year.

(To know more, check out historical annual results for L&T and quarterly results for L&T)

Read: Latest Annual Report Analysis of L&T