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Lakshmi Energy: Higher offtake aids growth - Views on News from Equitymaster

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Lakshmi Energy: Higher offtake aids growth
Jan 27, 2010

Performance summary
  • Consolidated top-line increased by 15% YoY during 1QFY10.
  • Consolidated operating (EBITDA) margins contract by 1.5% due to faster decline in expenses as compared to sales.
  • Consolidated net profit margins increased by 36% YoY on the back of higher sales and lower tax expense.

(Rs m) 1QFY09 1QFY10 Change
Net sales 1,769 2,030 14.8%
Expenditure 1,317 1,541 17.0%
Operating profit (EBDITA) 452 490 8.2%
EBDITA margin (%) 25.6% 24.1%  
Other income - -  
Interest 128 140 9.6%
Depreciation 61 89 44.5%
Profit before tax 263 261 -0.9%
Minority Interest - -  
Tax 88 24 -73.0%
Profit after tax/(loss) 175 237 35.6%
Net profit margin (%) 9.9% 11.7%  
No. of shares (m) 63 63  
Diluted earnings per share (Rs)*   21.2  
Price to earnings ratio (x)*   6.6  

What has driven performance in 4QFY09?
  • Sales are higher primarily due to higher offtake in the agri business. The sales in the agri business grew by 14% YoY while the energy business witnessed strong sales with an increase of 34% YoY.

    Consolidated cost break-up
    as a % of net sales 1QFY09 1QFY10
    Total Cost of goods 68.7% 68.7%
    Staff Cost 1.0% 1.4%
    Other Expenditure 4.7% 5.8%

  • Operating (EBITDA) income increased by 8.2% YoY during the quarter. This is because, higher staff costs and higher other expenditure as a percentage of sale weighted it down. Staff costs increased by 53% YoY while other expenditure increased by 41% YoY during the quarter.

  • Net profit for the company increased by 36% YoY. The jump came on the back of lower tax expense for the year. Tax expenses fell by 73% YoY

What we expect?
At a price of 140, the stock is trading at 4.8 times our estimated FY11 earnings. While last year the company had not performed as per our estimates, we believe that higher offtake in agri business will help grow the topline. Moreover, the power segment continues to aid the margin growth. However, since our target price is based on the projections for the FY11 and since we believe that the company would be able to make up for the difference over the next couple of years, we stick with our current target price for the company.

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