The Hindu Business Line : Lakshmi Machine Works: Buy

EXPOSURES can be considered in the stock of LMW at the prevailing price of about Rs 7,000. The stock trades at 10 times its expected 2005 per share earnings. An average annual revenue growth of 20 to 25 per cent appears sustainable for at least in the next two to three years, given the scope for growth in the domestic textile machinery market and better exports prospects for castings and spinning machinery.

LMW is the leader in the spinning machinery segment. This segment accounts for 50 per cent of the total investments in the textile machinery sector in India. Demand for spinning machinery has perked up due to installation of additional spindleage, modernisation, technology upgradation and expansion in expectation of buoyant growth post removal of quotas in 2005. With the capacity to manufacture the entire range of spinning machines, the company is well positioned to take advantage of the investment momentum.

Despite the onslaught of imported machinery, LMW's growth has exceeded that of the average growth in the domestic industry. New products introduced that would substitute imports in the domestic market could also open up new avenues for growth.

Globally too, the business environment is improving with the ASEAN

countries accounting for 80 per cent of the spindleage installed in 2003. LMW's export of spinning machines has nearly doubled to Rs 70 crore during 2003-04. A number of new technically upgraded products have been introduced to compete in the overseas market. As LMW has a wide product range, it has been undertaking turnkey projects, giving it an edge abroad.

Its machine tools and castings businesses, too, have been buoyant due to the ongoing investment demand in the manufacturing sector in India and for castings abroad. About 68 per cent of the castings produced were exported.

LMW is in talks to sell its stake in the steel subsidiary, SISCOL. This venture ran into rough weather and the sale will relieve the pressures of supporting the sister unit; it may also lead to modest cash inflows.

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