Lakshmi Machine Works -- 2QFY2011 Result Update :: Angel Broking

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For 2QFY2011, Lakshmi Machine Works (LMW) posted strong top-line growth of
59.8% yoy to `429cr. This was slightly below our estimate of `450cr. OPM
increased by a strong 14.9%, which was slightly below our estimate. The company
reported high other income of `29cr. Consequently, PAT came in at `46cr, 2%
below our estimate of `47cr. We remain positive on the company’s business
outlook given its strong order book position of `3,600cr and the robust demand
in the textile industry. Hence, we maintain an Accumulate on the stock.


Strong top-line growth; order inflow increases: LMW reported strong sales growth
of 59.8% yoy and 28.5% qoq, as demand from the textile industry players surged
during the quarter. This was also reflected in the company’s strong order book of
`3,600cr. Order inflow for the quarter stood at over `800cr.


Outlook and Valuation: We are positive on the company’s business prospects
given its strong outstanding order book of `3,600cr and increased activity in its
user industry of textiles. The textile players are currently operating at high
utilisation levels of around 90-95%, as the industry is witnessing high growth. The
strong order book further supports our positive outlook. The stock is currently
trading at 21.1x and 14.5x FY2011 and FY2012 EPS. Owing to strong order
book position, improved business outlook and increased liquidity with the textile
spinners due to TUFS fund release, we upgrade our target P/E multiple to 16.0x
from 15.0x and increase our Target Price to `2,977 (`2,819). We maintain an
Accumulate on the stock.