Lakshmi Machine Works - 4QFY2012 Result Update - Angel Broking

Lakshmi Machine Works (LMW) posted a 6.1% yoy decline in its top line to Rs.502cr (Rs.531cr) during 4QFY2012. OPM fell by 246bp yoy to 9.7%, lower than our estimates, mainly due to higher other expenditure. PAT declined by 84.2% yoy to Rs.7cr. We maintain our Buy rating on the stock.

Top line declines; order book down to Rs.4,216cr: LMW's net sales declined by 5.4% qoq and 6.1% yoy to Rs.502cr on the back of lower sales in the textile machinery division. The textile machinery division registered a 12.3% qoq and 8.9% yoy decline in its revenue to Rs.413cr. The company's others segment, however, witnessed 30.4% qoq and 7.4% yoy growth in revenue to Rs.93cr. The company's EBITDA declined by 25.1% yoy to Rs.49cr on the back of lower revenue and margin contraction. EBITDA margin contracted by 246bp yoy to 9.7% on account of higher other expenditure. Other expenditure as a percentage of sales increased to 19.4% in 4QFY2012 compared to 14.5% in 4QFY2011. PAT declined by 84.2% yoy to Rs.7cr on the back of margin contraction, prior-period finance cost of Rs.5cr and higher tax provision due to prior-period tax adjustments of Rs.16cr, resulting in tax rate of 78.1% of PBT in 4QFY2012 vs. 25.6% of PBT in 4QFY2011. Consequently, PAT margin declined by 687bp yoy to 1.4%. Adjusted for prior-period adjustments, PAT came in at Rs.28cr, down 36.4% yoy. The company's order backlog now stands at Rs.4,216cr, down from Rs.4,500cr in 3QFY2012.

Outlook and valuation: We remain positive on LMW's long-term outlook, given a strong order book of Rs.4,216cr, although management expects FY2013 to be weak and expects zero growth with only 30% active orders from the total order book. At the CMP, the stock is trading at 10.8x and 9.3x its FY2013E and FY2014E EPS, respectively, which we believe is attractive. We continue to maintain our Buy rating on the stock with a downward revised target price of Rs.1,992.

Source : Equity Bulls

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