Lokesh Machines Ltd - Rs 74.00
Established in1983 and promoted by Mr. Lokeshwara Rao - first generation entrepreneur & technocrat, Lokesh Machines Ltd (LML) is engaged in the design, development and manufacture of custom built special purpose machines(SPM) and general purpose CNC (computerized numerical controls) machines along with their components. From a modest beginning by handling job works, today company has emerged as an integrated machine tool manufacturer with operations in two main business segments namely machine tools and auto parts. Over a period LML has developed various range of SPMs including single and multi spindle machines, shuttle type, way type, linear and rotary indexing machines, linear transfer lines etc. Under the CNC segment, it manufactures horizontal and vertical machining centre, turning centre, milling and boring machines etc. And in the auto component sector, it has been concentrating on manufacturing / machining auto components like cylinder blocks, cylinder heads etc to original equipment manufacturers. Hence LML primarily caters to customers in the auto OEM, auto ancillaries and general engineering space. Presently, company derives 70% revenue from machining division whereas rest 30% comes from auto component division.
LML has five manufacturing units all located in Andhra Pradesh and under technical association with Grob Gmbh-Germany, Fagima-Italy, SCMS-Japan, AVM Angelini-Italy, Wenig Wemas-Germany & IMT Intermato-Italy. In the domestic market company supplies mainly to M&M, Ashok Leyland, Force Motors, Cummins, Tata Motors, Bajaj Auto, Bharat Forge, Kirloskar Oil Engines, Everest Kanto Cylinders etc. LML has a capacity for machining and supply of 1,20,000 units per annum each of cylinder blocks and cylinder heads, especially for M&M. And recently, it has set up an additional facility for machining of 40,000 units per annum each of cylinder blocks and cylinder heads, especially for Ashok Leyland. After successful trial runs, the production at this facility has commenced from April 2007. Off late, LML has also made a foray in the overseas markets with orders from M/s FPT Industries Spa-Italy, Honda Motorcycles-Japan and HOWA-Japan. Further, its technical partner Wenig Wemas-Germany has also placed initial order of 100 machines worth 20 cr. So going forward company is looking to gradually increase its share from international market as well.
In April 2006, LML came out with an IPO at Rs.140 per share and raised Rs.42 cr. This entire proceed has been utilized for setting up new facility for Ashok Leyland and also to meet the cost of modernization and to upgrade the existing facilities for the manufacture of CNC machine tools. Financially, company is doing well as it recorded 20% and 30% growth in sales and NP to Rs 68 and Rs 8.60 cr respectively for nine months ending Dec 2007. Thus for entire FY08 it is expected to clock a turnover of 105 cr and PAT of Rs 13 cr i.e. EPS of Rs 11 on equity of 11.80 cr. Therefore, the scrip is currently trading at a P/E ratio of merely 8x times which is extremely cheap for such a fast growing engineering company. Moreover the continuing growth in the domestic demand for machine tools both in the capital goods and auto component sectors offers an opportunity for further progress. So for FY09 it has the potential to post an EPS of Rs 14~15. Interestingly, scrip made a 52W high of Rs 166 on 7th Jan 2008 and a low of Rs 51 on 24th March 2008. Considering its IPO price of Rs 140 Rs and the current market sentiment, this is one of the safe bet which can give handsome return in medium to long term. Investors are strongly recommended to buy at current levels as scrip can easily appreciate 50% within 9~12 months.
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