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Lakshmi Energy: Higher realisations drive growth - Views on News from Equitymaster
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Lakshmi Energy: Higher realisations drive growth
Aug 1, 2008

Performance summary
  • Lakshmi Energy (LEAF)reports a topline growth of 73% YoY during 1QFY09 on the back of strong volumes and realisations.
  • Operating margins decline by 1.3% YoY during 1QFY09 on account of higher raw material costs.
  • Net profit growth at 32% YoY is slower than the growth in operating profits due to lower other income and higher interest and depreciation costs.

(Rs m) 1QFY08 1QFY09 (%) Change
Net sales 1,927 3,324 72.5%
Expenditure 1,520 2,667 75.5%
Operating profit (EBDITA) 407 657 61.3%
EBDITA margin (%) 21.1% 19.8%  
Other income 9 3 -69.8%
Interest 24 122 411.8%
Depreciation 30 57 86.2%
Profit before tax 361 480 32.9%
Tax 121 164 35.7%
Profit after tax/(loss) 241 316 31.5%
Net profit margin (%) 12.5% 9.5%  
No. of shares (m) 60.0 60.0  
Diluted earnings per share (Rs)*   21.5  
Price to earnings ratio (x)*   12.1  

What has driven performance in 1QFY09?
  • Lakshmi Energy and Foods (LEAF) witnessed a robust topline growth of 73% YoY in 1QFY09. The rice volumes saw a growth of more than 20% YoY on account of capacity expansions. Even the paddy realisations jumped by 26% YoY, although its contribution to total sales declined to 83% (93% in FY08). Given that rice production is expected to be lower this year and demand is growing by 4% annually, the prices are expected to rise further.
  • Rice bran oil volumes jumped 93% YoY, while paddy husk saw an 88% YoY jump in volumes for 1QFY09. Both, de-oiled cakes and cattle feed volumes surged by more than 100% YoY. While paddy husk realisations were higher by 220% YoY, other segments saw an increase in strong double digits.

    Cost break-up
    as a % of net sales 1QFY08 1QFY09
    Total Cost of goods 76.6% 78.2%
    Staff Cost 0.4% 0.4%
    Other Expenditure 1.8% 1.7%

  • Operating margins declined by 1.4% YoY during 1QFY09 on account of higher raw material costs. The raw material costs stood at 78% of sales as compared to 76.6% in 1QFY08. The minimum support price (MSP) was increased this year from Rs 775 per quintal to Rs 850 per quintal.

  • The growth in the bottomline (up 32% YoY) was lower than that in the topline on account of lower operating margins, reduction in other income and higher interest costs and depreciation charges. The net margins stood at 9.5% in 1QFY09 as compared to 12.5% in 1QFY08.

What to expect?
At the current price of Rs 260, the stock is trading at a price to earnings multiple of 8.1 times our estimated FY10 earnings. The company continued its growth momentum on account of robust industry scenario, capacity expansion and increased revenues from its value added activities. While the margins witnessed pressure in this quarter on account of higher raw material prices, the management is confident of improving them going forward on account of increasing sale of value added products. The company has lined up capex plans of around Rs 8 bn to Rs 9 bn in the next 3 to 4 years to expand its capacities across all segments. It has also implemented India’s largest husk fueled power plant with 30 MW capacity and has the approval to set up a total of 105 MW under the Mega Project Policy of the State Government. Further, with the rice demand supply gap narrowing down, the management expects price realisations to remain high, thus benefiting the company. We maintain our positive view on the stock.

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Feb 22, 2018 01:23 PM


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