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Lakshmi Energy: Power saves the day - Views on News from Equitymaster

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Lakshmi Energy: Power saves the day
Feb 5, 2009

Performance summary
  • Topline declines by 28% YoY during 1QFY09 on the back of lower volumes.
  • Operating margins improve by 3.3% YoY on account of higher margins from power segment
  • Decline in sales and other income leads to a drop of 31% YoY in the bottomline.


Consolidated financials
(Rs m) 1QFY08 1QFY09 Change
Net sales 2,466 1,767 -28.4%
Expenditure 1,919 1,317 -31.4%
Operating profit (EBDITA) 547 450 -17.7%
EBDITA margin (%) 22.2% 25.5%  
Other income 3 2 -17.9%
Interest 111 128 14.7%
Depreciation 58 61 5.1%
Profit before tax 380 263 -30.7%
Tax 127 88 -30.5%
Profit after tax/(loss) 253 175 -30.8%
Net profit margin (%) 10.3% 9.9%  
No. of shares (m) 63.0 63.0  
Diluted earnings per share (Rs)*   17.4  
Price to earnings ratio (x)*   10.2  

What has driven performance in 1QFY09?
  • Lakshmi Energy and Foods (LEAF) reported a decline in sales of 28% YoY during 1QFY09. Though not comparable on a like to like basis, as the results for the quarter includes revenues from the power segment, slow purchase of rice by Food Corporation of India and the ban on export of non-basmati rice imposed by government impacted the volumes. The company in most of its segments witnessed a huge decline in volumes. However, realisations have increased expect for rice bran oil. The sales include Rs. 167.5 m from the sale of power to Punjab State Electricity Board (PSEB) and Power Trading Corporation (PTC). The power was sold at an average realization of Rs. 8.45 per unit.

    Segment performance
    % growth (YoY) Volumes Realisations
    Rice -67.3 112.9
    Nakku -86.4 6.6
    Rice Bran Oil -63.1 -32.4
    De-Oiled Cakes -78.0 67.5
    Cattle Feed -97.2 13.9

  • The operating margins during the quarter were higher by 3.3% YoY While the costs of raw materials were on the lower side as a percent of sales, the expansion in the margins was mainly on account of higher margins of the power generation segment.

  • Inspite of higher operating margins, the bottomline decreased by 31% YoY. Decline in sales during the quarter led to the drop in profits. The net margins declined by 0.4% YoY.

What to expect?
At the current price of Rs 178, the stock is trading at a price to earnings multiple of 10.2 times its 12 month trailing earnings. Though the volumes were lower, higher price realisations aided some growth. Further, its integrated business model saved the day. The company is expanding its power capacity to 30 MW from 15MW by FY09. This will further aid its margins growth.

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