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Lakshmi Energy: Raw material plays spoilsport
May 13, 2010

Lakshmi Energy and Foods Limited has announced its 2QFY10 results. The company has reported a 66% YoY and 27% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Consolidated top-line increased by 66% YoY during 2QFY10.
  • Consolidated operating (EBITDA) margins contract by 17.7% due to higher growth in operating expenses as compared to sales.
  • Consolidated net profit increase by 26% YoY inspite of lower operating income as a result of lower depreciation and lower tax expense.


Consolidated picture
(Rs m) 2QFY09 2QFY10 Change 1HFY09 1HFY10 Change
Net sales      1,520      2,525 66.1%      3,289      4,551 38.4%
Expenditure         940      2,009 113.8%      2,257      3,573 58.3%
Operating profit (EBDITA)         580         517 -11.0%      1,032         978 -5.3%
EBDITA margin (%) 38.2% 20.5%   31.4% 21.5%  
Other income             1             1               1             1  
Interest         173         176 1.8%         301         317 5.3%
Depreciation         134           90 -32.8%         195         179 -8.4%
Profit before tax         274         251 -8.4%         537         483 -10.1%
Minority Interest           -              -                -              -     
Tax           92           20 -78.0%         180           44 -75.6%
Profit after tax/(loss)         182         231 26.6%         357         439 22.9%
Net profit margin (%) 12.0% 9.1%   10.9% 9.6%  
No. of shares (m)           63           63             63           63  
Diluted earnings per share (Rs)*                15.3  
Price to earnings ratio (x)*                  7.8  

What has driven performance in 2QFY10?
  • Sales are higher primarily due to higher offtakein the agri business. The sales in the agri business grew by 93% YoY while the sales of the energy business fell by 53% YoY.
    Consolidated cost break-up
    As a % of net sales 2QFY09 2QFY10 1HFY09 1HFY10
    Total Cost of goods 54.6% 74.2% 62.2% 72.9%
    Staff Cost 0.7% 1.0% 0.9% 1.0%
    Other Expenditure 6.5% 4.4% 5.6% 4.6%

  • Operating (EBITDA) income fell by 11% YoY during the quarter. This was a result of higher costs of goods and higher staff costs as a percentage of sales. Costs of raw material increased by 126% YoY during the quarter while staff costs increased by 120% YoY. The operating income could have been lower but for fall in other expenditure as a percentage of sales.

  • Net profit for the company increased by 27% YoY. The jump came on the back of lower depreciation and lower tax expenses. Depreciation costs fell by 33% Yoy while tax expenses fell by 78% YoY.

What we expect?
At a price of 119, the stock is trading at 4.1 times our estimated FY11 earnings. The company’s performance has come in much below our expectations. We are trying to get in touch with the management to understand the reasons for the same. Will soon come out with an updated view on the stock.

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