Q4 FY08 Result Update

ARIHANT capital markets ltd. Date: 28th May’08

Lakshmi Machine Works Ltd

CMP: Rs. 1590 Industry: Textile Machinery
Stock Info BSE Group A Shareholding Pattern
Market Capital Rs.2031cr BSE Code 500252 (As on 31st Mar, 2008)
Equity Capital Rs.12.37cr NSE Symbol LAXMIMACH Promoters 25.28%
Avg Trading Vol. 8363(Qtr) Bloomberg LMW IN Domestic Institutions 22.22%
52 WK High/Low 4000/1362 Reuters LKMC.BO Foreign Institutions 3.74%
Face Value Rs. 10 BSE Sensex 16308 Corporate 14.23%
NSE Nifty 4855 Public & Others 34.53%

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.

Rs cr 2006-07 % of Total 2007-08 % of Total

Exports 82 4.4 129 5.9
Domestic 1771 95.6 2076 94.1
Total 1853 100 2205 100

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Valuation & view

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

Q4 Mar'07 Q4 Mar'08 Y-O-Y % FY07 FY08 Y-O-Y %

Net Sales 549 604 10.0 1854 2205 19.0
Other Income 33 29 88 88
Total Income 582 633 8.8 1942 2293 18.1
Raw Material Consumed 329 344 4.7 1114 1314 18.0
Stock Adjustment -6.2 17 -6.0 -9.0
Employee Expenses 35 37 7.9 129 146 13.1
Other Expenses 104 106 2.4 328 354 8.2
TOTAL EXPENDITURE 461 504 9.4 1564 1806 15.4
EBITDA 88 100 12.9 289 399 38.1
Depreciation 22 36 61.3 69 116 68.5
Interest - - - -
PBT 99 93 -5.9 309 371 20.3
Tax 25 28 85 110
Fringe Benefit Tax 0.16 0.54 0.71 2
Deferred Tax 6 5 17 17
Total Tax 30.74 33.22 8.1 102.68 128.65 25.3
Reported Profit After Tax 68 60 -12.2 206 243 17.8
EPS (Unit Curr.) 55.48 48.51 -12.6 166.7 195.89 17.5
Equity 12.37 12.37 12.37 12.37

EBITDAM (%) 16 16 - 16 18 -
PATM (%) 12 10 - 11 11 -

Q4 Mar'07 Q4 Mar'08 Y-O-Y % FY07 FY08 Y-O-Y %

Segment Revenue
Textile Machinery Division 512 569 11 1711 2056 20
Machine Tool & Foundry Division 73 58 -22 211 203 -4
Total 585 627 7 1923 2259 17
Less Inter segment revenue 3.2 1 15
Net Sales 582 625 7.4 1908 2259 18.4
Segment Result (PBIT)
Textile Machinery Division 96 83 -14 283 337 19
Machine Tool & Foundry Division -1 3 544 9 14 60
Total 96 86 -10 292 351 20
Add Un-allocable items 3.5 7 17 20.1
PBT 99 93 -6 309 371
Source: Company

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Head Institutions

Anita Gandhi Head Institutional Equity (91-22) 56205753 anita.gandhi@arihantcapital.com

Equity Research

Arpit Agrawal Research Head (91-22) 67664836 arpit.agrawal@arihantcapital.com

Satish Kannav Economist (91-22) 67664828 satish.kannav@arihantcapital.com
Rajesh Palviya Head- Technical (91-22)67664800 rajesh.palviya@arihantcapital.com
Divyata Dalal Senior analyst (91-22) 67664834 divyata.dalal@arihantcapital.com
Shruti Jain Research Analyst (91-22)67664837 shruti.jain@arihnatcapital.com
Tejvinder Singh Research Analyst (91-22) 67664830 tejvinder.singh@arihantcapital.com
Manisha Porwal Research Analyst (91-22) 67664834 manisha.porwal@arihantcapital.com
Paresh Nautiyal Research Analyst (91-22)67664827 paresh.n@arihantcapital.com
Suneel Rao Research Associate (91-22) 67664830 suneel.rao@arihantcapital.com
Sumit Ajmera Editor (91-22)64664800 sumit.ajmera@arihantcapital.com

Institutional Dealing Desk

Archana Kathe Dealer (91-22) 67664849 instdealing@arihantcapital.com

Sadhana Mishra Dealer (91-22) 67664800 instdealing@arihantcapital.com
Vidit Gupta Dealer (91-22) 67664850 instdealing@arihantcapital.com
Jigar Tanna Dealer (91-22) 67664852 instdealing@arihantcapital.com
Shailesh Jathar Dealer (91-22) 67664852 instdealing@arihantcapital.com
Bhavesh Katariya Dealer (91-22) 67664848 instdealing@arihantcapital.com

Head Office

3rd Floor, Krishna Bhavan,

Opp. Green House Restaurant,
67,Nehru Road, Vile Parle (East),
Mumbai-400057.
Tel: (91-22) 67664800
Fax: (91-22) 67664880

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