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Lakshmi Energy: All round growth - Views on News from Equitymaster

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Lakshmi Energy: All round growth
Nov 25, 2008

Performance summary
  • Topline grows by 23.4% YoY during September quarter on the back of strong realisations. Operating margins improve by 2.1% YoY on account of lower raw material costs.

  • Net profit growth at 16% YoY is slower than the growth in topline due to lower other income and higher interest costs.

  • The company has changed its accounting year from March to September. Hence the results for FY08 are for 18 months and are not comparable to that of FY07.



(Rs m) Sep-07 Sep-08 Change FY08 ( 18months)*
Net sales 2,054 2,533 23.4% 15,402
Expenditure 1,602 1,922 20.0% 12,125
Operating profit (EBDITA) 452 611 35.4% 3,277
EBDITA margin (%) 22.0% 24.1%   21.3%
Other income 2 0 -77.2% 27
Interest 44 136 205.6% 567
Depreciation 68 86 26.1% 336
Profit before tax 341 390 14.5% 2,401
Tax 113 125 10.8% 810
Profit after tax/(loss) 228 265 16.3% 1,591
Net profit margin (%) 11.1% 10.5%   10.3%
No. of shares (m) 60.0 63.0   63.0
Diluted earnings per share (Rs)*       25.2
Price to earnings ratio (x)*       5.7
* The company has changed its accounting year from March to September. Hence FY08 results are for 18 months

What has driven performance in September quarter?
  • Lakshmi Energy and Foods (LEAF) reported a topline growth of 23.4% YoY during the September quarter. During the quarter, the income from agri-division increased by 22% YoY. The company has also earned revenues from the power segment to the tune of Rs 19.7 m. It sold power to PTC at the rate of Rs 8.86 per unit.

    % growth (YoY) Volumes Realisations
    Rice -2.6 24.3
    Nakku -64.5 33.8
    Rice Bran Oil -10.2 -9.2
    De-Oiled Cakes 121.4 27.0
    Cattle Feed -30.2 0.4
    Paddy Husk 288.1 215.6

  • Sales of rice, nakku and rice bran oil saw a decline in volumes on account of lower capacities as the company has scrapped the old capacities. Paddy husk witnessed a 288% YoY jump in volumes. On the realisations front, a 24% YoY jump was seen in rice and a 34% YoY increase in nakku realisations. For FY08, the paddy realisations stood at Rs 1,350, higher by 11% as compared to last year.

  • The company’s operating margins improved by 2.1% during the quarter mainly on account of lower raw material costs as a percent of sales. The raw materials formed 72.6% of sales in the September quarter as compared to 75.1% during the corresponding quarter the previous year. For the full year, the margins stood at 21.3%.

  • The profits for the quarter jumped 16.3% YoY. Higher topline growth aided by margin expansion led to the jump in the profits. However, the interest costs were higher on account of its capex plans.

What to expect?
    At the current price of Rs 145, the stock is trading at a price to earnings multiple of 5.7 times its 12 month trailing earnings. The company has altered its expansion plans. Instead of its 2 MT capacity expansion plan it is now replacing the older plants with new plants as they have better utilization rates. The company will have 1.8 MT capacity by FY09. In terms of power, its capacity will stand at 30 MW from current 15 MW. The cost of these expansion plans is to the tune of Rs 2 bn, which the company has the necessary funds.

    It is also now processing PUSA 112 variety of rice as it has higher yield and higher realisations than other grades. It expects the margins to be at current levels. While the minimum support price (MSP) varies from Rs 850 to Rs 880 for the current season, the final rice price is yet to be declared by the government. With demand for rice increasing, the management expects the price to be on a higher side. It continues to benefit from its integrated model.

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