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Lakshmi Machine Works (LMW) is the dominant textile machinery manufacturer in India and one among the three
in the world to produce the entire range of spinning machinery.LMW basically operates in three segments namely
Textile machinery , Machine tools and Foundry.
Results Highlights
Corresponding quarter review: Q4-FY08 v/s Q4-FY07 (March’08 v/s March’07)
Laxshmi Machine Works (LMW) registered 10% growth in Net Sales to Rs 604cr for Q4FY08, with Textile machinery division
registering 11% growth while contributing 91% of total sales and Machine Tool and Foundry division showing de-growth of
22% while contributing 9% of total sales.
Full year review: FY08 v/s FY07
For year ended March 2008 LMW registered 19 % growth in Net Sales to Rs 2205 cr. PAT grew by 17.8% to Rs
243cr.Company was able to maintain its PAT margins of 11%. The Textile and machinery division grew by 20% contributing
91% of total sales and Machine tool and foundry division reported de-growth of 4% and contributed 9% of total sales.
Developments
• The company is witnessing slowdown in its order book since second half of FY08.The current order book as on
March08 stood at Rs 4420cr as against Rs 5320 cr in March 07. The small and medium size customers have been
deferring deliveries and scaling down their orders due to slowdown in exports on account of strengthening of rupee
against US Dollar and also due to recessionary conditions in US.
• LMW is making its first foray into Chinese market in current year with an initial investment of US$ 15-20 Million.
China at present has around 52 % of world capacity in spinning; this presents a huge opportunity to LMW.
• Company is keen to expand its machining capacity; however it has been unable to get technological knowhow as it’s
concentrated with few hands globally, and it has signed collaboration with few institutes abroad and in India to
develop knowhow.
• Despite a steep rise in steel prices, the key raw material, the growth in input cost was only marginal due to benefits
derived from imposition of VAT in Tamil Nadu. On the power front the company has 26.5MW power capacity
through its wind mills .This has assisted in maintaining its margins.
• The company’s former collaborator Rieter (which also holds 13% equity stake in LMW) has announced that it is
setting up its own 100% subsidiary to enter the textile machinery business directly.
• Geographical analysis: For LMW India is the principal market for company’s products. The textile machinery
division contributes 70 % of the export income, while foundry division earns the balance.
At CMP of Rs 1590 stock is trading at trailing PE of 8.1 x (EPS of Rs 196 in FY08). While there are no immediate triggers for
the earnings to grow, any revival in Indian textile sector aided by the depreciating INR as against US$ and success in the
Chinese market would merit a relook for the stock.
Financials Rs in Crores
EBITDAM (%) 16 16 - 16 18 -
PATM (%) 12 10 - 11 11 -
Equity Research
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