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From Lakshmi Machine Works, Mr. R. Rajendran, Director- Finance and Mr.
C B Chandershekhar, Sr. General Manager- Finance shared their views on
the company and the industry.
Key Highlights
n Competition in the domestic market is increasing led by international players (Reiters,
Truzler, Marzoli) setting up individual facilities in India.
n LMW plans to maintain its market share with its execution capabilities and edge over
the pricing (it offers products at 10-12% lower price than its international peers) and
strong after sale service.
n Installed capacity in China currently at 4.5 - 5lac spindles, which it expects to expand to
not more than 1mn. It has so far invested $5mn with a total outlay of $12mn - to be
incurred in a phased manner.
n On the back of strong demand from auto ancillary industry, machine tool segment
registered ~100% yoy growth in FY11 and it further expects 30-35% growth in FY12E.
n Order book remains strong at Rs47bn at the end of FY11 and it has received orders
worth ~Rs3.0bn in Q1FY12E. Order inflows remain strong and company has been
quoting delivery time of 10-12 months.
n Management indicated that government's policy towards yarn and cotton producers
remains a critical point for LMW. Any kind of negative for the industry (textile or cotton)
would adversely impact the company.
n The major risk according to the management was increasing competition from
international players. This could limit further price hike and restrict significant margins
improvement.
n Margin pressure witnessed during the last two quarters due to rising raw material
prices showing some signs of cooling off in FY12E. Further, the impact of price hike
taken in April, 2011 would be visible from Q2FY12E onwards.
n The company has two vacant plots with total space of 5 acres and 15 acres. It is
developing 5 acre land into 240-250 housing flats, which would be sold to employees
and other buyers from December, 2011.
Outlook and Valuation
LMW has received order inflows of ~Rs11bn for the second consecutive quarter. Total
order book of Rs47bn gives revenue visibility for the next 18-24 months. Secondly, the
recent price hike across the product line would limit any kind of further downside to margins.
We maintain our ACCUMULATE rating on the stock with a price target of Rs2,535, based
on 9x FY13E core EPS of Rs150.8 and net cash of Rs1,178 per share. In the wake of a
healthy order book and revenue visibility for the next two years, we highlight that margin
improvement would happen gradually. At CMP of Rs 2,085, LMW trades at 12.0x FY12E
and 10.3x FY13E EPS of Rs174.1 and Rs203.4 respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
From Lakshmi Machine Works, Mr. R. Rajendran, Director- Finance and Mr.
C B Chandershekhar, Sr. General Manager- Finance shared their views on
the company and the industry.
Key Highlights
n Competition in the domestic market is increasing led by international players (Reiters,
Truzler, Marzoli) setting up individual facilities in India.
n LMW plans to maintain its market share with its execution capabilities and edge over
the pricing (it offers products at 10-12% lower price than its international peers) and
strong after sale service.
n Installed capacity in China currently at 4.5 - 5lac spindles, which it expects to expand to
not more than 1mn. It has so far invested $5mn with a total outlay of $12mn - to be
incurred in a phased manner.
n On the back of strong demand from auto ancillary industry, machine tool segment
registered ~100% yoy growth in FY11 and it further expects 30-35% growth in FY12E.
n Order book remains strong at Rs47bn at the end of FY11 and it has received orders
worth ~Rs3.0bn in Q1FY12E. Order inflows remain strong and company has been
quoting delivery time of 10-12 months.
n Management indicated that government's policy towards yarn and cotton producers
remains a critical point for LMW. Any kind of negative for the industry (textile or cotton)
would adversely impact the company.
n The major risk according to the management was increasing competition from
international players. This could limit further price hike and restrict significant margins
improvement.
n Margin pressure witnessed during the last two quarters due to rising raw material
prices showing some signs of cooling off in FY12E. Further, the impact of price hike
taken in April, 2011 would be visible from Q2FY12E onwards.
n The company has two vacant plots with total space of 5 acres and 15 acres. It is
developing 5 acre land into 240-250 housing flats, which would be sold to employees
and other buyers from December, 2011.
Outlook and Valuation
LMW has received order inflows of ~Rs11bn for the second consecutive quarter. Total
order book of Rs47bn gives revenue visibility for the next 18-24 months. Secondly, the
recent price hike across the product line would limit any kind of further downside to margins.
We maintain our ACCUMULATE rating on the stock with a price target of Rs2,535, based
on 9x FY13E core EPS of Rs150.8 and net cash of Rs1,178 per share. In the wake of a
healthy order book and revenue visibility for the next two years, we highlight that margin
improvement would happen gradually. At CMP of Rs 2,085, LMW trades at 12.0x FY12E
and 10.3x FY13E EPS of Rs174.1 and Rs203.4 respectively.
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