Veejay Lakshmi Engineering Works Ltd - 97.00 Rs

Incorporated in 1947, Veejay Lakshmi Engineering Works Limited (VLEWL) manufactures textile machinery namely twisters and winders, which are used in the textile spinning mills for post spinning operations. Infact, company is the largest manufacturer of Two-for-one Twister (TFO) in India with more than 4500 installations worldwide and also the only manufacturer of Automatic Cone Winders (ACW) in India. Interestingly, company also has a high pressure die casting division under which it produces dies, moulds and other precision components from 40 Tons to 400 Tons capacity for the textile and engineering industry. Apart from the engineering division, it is also actively engaged in manufacturing of 100% cotton yarn through its wholly owned subsidiary called ‘Veejay Lakshmi Textiles’ which has a capacity of around 15936 spindles.

VLEWL has four manufacturing facilities, all located in Coimbatore, Tamilnadu. It has also invested in wind mills and has presently installed around nine wind mills having capacity of more than 4000 KW. The power generated from these are used/adjusted for the power consumed from the state grid by itself and its subsidiary. Last year, VLEWL came out of the joint venture arrangement with Savio, but retained the right to continue to produce the automatic cone winders with the know-how given by the Savio. However it cannot use the trade/brand names Savio and Espero, hence is now selling its winders under its own brand name ‘EXCELLO’. Importantly, company is handling all manufacturing, marketing, installation, after sales service and supply of all spare parts relating to automatic cone winder through its own separate sales and distribution network company called Veejay Sales and Services Ltd. This associate company also undertakes annual maintenance contracts for the maintenance of automatic cone winders. Interestingly, VLEWL has even established a full fledged printed circuit board (PCB) reconditioning lab facility to offer PCB reconditioning and repair facilities to all customers with minimal time for service.

On the back of the strong industrial growth and better future prospects, VLEWL has strengthen its aluminum die casting division by installing second hand machines imported from Switzerland. The subsidiary company i.e. Veejay Lakshmi Textiles has also planned for investments in a garment unit and expansion of the spinning capacity. Moreover, most of the spinning mills in India are modernizing and expanding their capacities and there are also new mills being set up. Hence, the demand for company’s main products viz. twisters and winders is expected to go up considerably in future. Accordingly, company has also taken steps to give thrust to its marketing activities by conducting road shows and seminars in different parts of the country and the response is encouraging. Considering all the factors, company is estimated to report sales of 100 cr and PAT of 9 cr for FY08 on a standalone basis. This means an EPS of 18 Rs on small equity of 5 cr. Consolidated nos will be much better. However the rising competition from import of new and second hand textile machines is a cause of concern for company. Still, with a gross block of 75 cr, reserves of 57 cr (i.e. BV of 123 Rs), investment of 21 cr (in subsidiary) this debt free company is a pure value buy at current market cap of 50 cr. Only long term investors are advised to buy for a price target of 175/- Rs (75% appreciation) in 15~18 months.