Buy Lakshmi Machine; target of Rs 1992: Angel Broking

Angel Broking is bullish on Lakshmi Machine Works and has recommended buy rating on the stock with a target of Rs 1992 in its May 25, 2012 research report.

“Lakshmi Machine Works (LMW) posted a 6.1% yoy decline in its top line to Rs502cr (Rs531cr) 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 Rs7cr. We maintain our Buy rating on the stock.”

“LMW’s net sales declined by 5.4% qoq and 6.1% yoy to Rs502cr 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 Rs413cr. The company’s others segment, however, witnessed 30.4% qoq and 7.4% yoy growth in revenue to Rs93cr. The company’s EBITDA declined by 25.1% yoy to Rs49cr 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 Rs7cr on the back of margin contraction, prior-period finance cost of Rs5cr and higher tax provision due to prior-period tax adjustments of Rs16cr, 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 Rs28cr, down 36.4% yoy. The company’s order backlog now stands at Rs4,216cr, down from Rs4,500cr in 3QFY2012.”

“We remain positive on LMW’s long-term outlook, given a strong order book of Rs4,216cr, 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 Rs1,992,” says Angel Broking research report.

Shares held by Mutual Funds/UTI

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More