Lakshmi Machine Works - 1QFY2013 Result Update - Angel Broking

Lakshmi Machine Works (LMW) posted a decline in its top-line by 14.6% yoy to Rs.435cr (Rs.509cr) during 1QFY2013. Its OPM fell by 93bp yoy to 12.7%, in-line with our estimates, mainly due to higher other expenditure. The PAT declined by 33.7% yoy to Rs.28cr. We maintain our Buy rating on the stock.

Top-line declines with order book down to Rs.4,216cr: LMW announced below par numbers for 1QFY2013. The company's net sales declined by 13.3% qoq and 14.6% yoy to Rs.435cr on the back of lower sales in the textile machinery division. The textile machinery division registered a 10.8% qoq and 15.8% yoy decline in revenue to Rs.369cr. The company's others segment also witnessed 26.4% qoq and 8.8% yoy decline in revenue to Rs.69cr. The company's EBITDA declined by 20.4% yoy to Rs.55cr on the back of lower revenue and margin contraction. The EBITDA margin contracted by 93bp yoy to 12.7% on account of higher other expenditure. Other expenditure as a percentage of sales increased to 18.1% in 1QFY2013 compared to 17.4% in 1QFY2012. PAT declined by 33.7% yoy to Rs.28cr on the back of margin contraction and higher tax provision which increased to 41.5% of PBT in 1QFY2013 vs 32.0% of PBT in 1QFY2012. Consequently, the PAT margin also declined by 182bp yoy to 6.3%. The company's order backlog now stands at Rs.3,900cr, down from Rs.4,216 in 3QFY2012.

Outlook and valuation: We remain positive on LMW's long-term outlook, given a strong order book of Rs.3,900cr. The management though expects FY2013 to be weak and expects zero growth with only 30% active orders from the total order book. At the current market price, the stock is trading at 11.2x and 9.6x its FY2013E and FY2014E EPS respectively, which we believe is attractive. We continue to maintain our Buy rating on the stock with a target price of Rs.1,992.

Source : Equity Bulls

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