Buy Lakshmi Machine; target of Rs 2780: Angel Broking

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Buy Lakshmi Machine; target of Rs 2780: Angel Broking

Angel Broking is bullish on Lakshmi Machine Works (LMW) and has recommended buy rating on the stock with a target of Rs 2780 in its August 16, 2011 research report.

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Angel Broking is bullish on Lakshmi Machine Works (LMW) and has recommended buy rating on the stock with a target of Rs 2780 in its August 16, 2011 research report.

"Lakshmi Machine Works (LMW) posted strong top-line growth of 47.9% yoy to Rs 511cr (Rs 346cr) during 1QFY2012. However, OPM fell by 227bp yoy to 13.9%, lower than our estimates, mainly due to higher raw-material cost and other expenditure. PAT grew strongly by 36.7% yoy to Rs 41cr. Strong top-line growth with order book swelling to Rs 4,800cr: LMW registered strong top-line growth of 47.9% yoy to Rs 511cr. The textile machinery division posted strong sales growth of 44.6% yoy to Rs 438cr (Rs 303cr). The others division also grew strongly by 69.0% to Rs 75cr (Rs 45cr). OPM contracted by 227bp to 13.9% due to higher raw-material cost and other expenditure. PAT margin contracted by only 66bp yoy due to lower tax provision and higher other income. The company has recorded yet another quarter of high order inflow, reflecting the strong demand from textile machinery manufacturers. The company's order backlog now stands at Rs 4,800cr, while total order inflow during 1QFY2012 stands at ~Rs 550cr."

"We remain positive on the company's outlook, given a strong order book of Rs 4,800cr. Although yarn prices have shown signs of correction in the recent past, overall demand, as reflected in the order inflow, is still robust. Spinning mills continue to operate at high utilisation levels. At the CMP, the stock is trading at 11.0x and 8.5x its FY2012E and FY2013E EPS, respectively, which we believe is attractive. We maintain our Buy recommendation on the stock with a target price of Rs 2,780," says Angel Broking research report.

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To read the full report click on the attachment