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Lakshmi Energy: Raw material woes continue
Nov 15, 2010

Lakshmi Energy and Foods Limited has announced its 4QFY10 results. The company has reported a 113% YoY growth in sales and 27% YoY fall in net profits. Here is our analysis of the results.

Performance summary
  • Consolidated top-line increased by 112.6% YoY during 4QFY10.
  • Consolidated operating (EBITDA) margins contract by 18.5% due to higher growth in operating expenses as compared to sales.
  • Consolidated net profit fell by 26.6% YoY as a result of lower operating income, higher interest costs and a sharp jump in depreciation.
  • The consolidated net profit for FY10 fell by 3.3% YoY while the net profit margins fell by 5.8%. This was due to a fall in operating income.


Consolidated picture
(Rs m) 4QFY09 4QFY10 Change FY09 FY10 Change
Net sales 1,871 3,978 112.6% 6,945 12,048 73.5%
Expenditure 1,251 3,398 171.6% 4,761 9,974 109.5%
Operating profit (EBDITA) 620 580 -6.5% 2,184 2,074 -5.0%
EBDITA margin (%) 33.1% 14.6%   31.4% 17.2%  
Other income 1 1 20.8% 1 7 985.9%
Interest 157 225 43.2% 682 730 7.0%
Depreciation 43 107 147.4% 348 366 5.2%
Profit before tax 421 249 -40.8% 1,155 986 -14.6%
Minority Interest            
Tax 100 14 -86.5% 239 100 -58.0%
Profit after tax/(loss) 321 236 -26.6% 916 886 -3.3%
Net profit margin (%) 17.1% 5.9%   13.2% 7.4%  
No. of shares (m) 63 63   63 63  
Diluted earnings per share (Rs)*         14.0  
Price to earnings ratio (x)*         6.0  
* 12 month trailing

What has driven performance in 4QFY10?
  • Sales are higher primarily due to higher offtake in the agri business. The sales in the agri business grew by 153% YoY while the sales of the energy business fell by 30% YoY.

    Consolidated cost break-up
    as a % of net sales 4QFY09 4QFY10 FY09 FY10
    Total Cost of goods 61.9% 75.4% 64.0% 76.0%
    Staff Cost 1.0% 0.5% 0.7% 0.7%
    Other Expenditure 3.9% 9.6% 3.9% 6.0%

  • Operating (EBITDA) income fell by 6.5% YoY during the quarter. This was a result of sharp increase in costs of goods and other expenditure. Costs of raw material increased by 159% YoY during the quarter while other expenditure increased by 420% YoY. The operating income could have been lower but for fall in staff costs as a percentage of sales.

  • Net profit margins for the company fell by 11.2% to stand at 5.9%. This is due to low operating margins earned by the company in the quarter. Higher interest costs and increase in depreciation also put pressure on net profit margins. Interest costs increased by 43.2% YoY while depreciation increased by 147.4% YoY.

What to expect?
At a price of Rs 84, the stock is trading at 3 times our estimated FY11 earnings. The company has recently taken the initiative to increase its presence in the retail market through basmati rice. For this, the company has taken on additional debt to fund its inventory. The company believes that the profitability of this venture would be much higher than that of its core business (trading with the FCI). The company’s board has also tabled a proposal recently for a share buyback. We are trying to speak to the management and will be reviewing our assumptions shortly.

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