LMW Limited — Q1 FY25 earnings call

Call held 1 Aug 2024

Management summary

LMW faced a challenging Q1 FY25 characterized by a sharp cyclical downturn in the textile machinery segment, leading to a significant drop in overall revenue and profitability. The company has responded by reducing working days and implementing layoffs to manage costs while maintaining a healthy total order book of ₹3380 crores. Management is focusing on new product launches like the Autoconer and Airjet looms to drive future growth while navigating geopolitical headwinds and competitive pressures from Japanese imports in the machine tool segment.

Highlights

  • Consolidated turnover declined 39.7% YoY to ₹636 crores from ₹1055 crores.

  • Consolidated PBT plummeted 86.7% YoY to ₹16.25 crores compared to ₹122 crores.

  • Textile Machinery Division (TMD) reported a loss of ₹12.72 crores on a 53.5% revenue decline.

  • Total order book stands at ₹3380 crores, with an active portion of ₹2100 crores slated for 12-month execution.

  • Machine Tool Division (MTD) revenue fell 15.2% YoY to ₹206 crores with 64-70% capacity utilization.

  • Aerospace (ATC) profit dropped to ₹1.5 crores from ₹4.39 crores due to investments in the composite division.

  • Company implemented a 5-day work week for TMD and Foundry divisions due to lower capacity utilization (45-50%).

  • LMW China reported a loss of ₹3.6 crores as the company rebuilds its organization and product line there.

Concerns

  • Japanese Yen Devaluation

  • Cyclical Downturn in Textiles

Key financials

  1. Revenue ₹636 Cr -39.7%YoY
  2. Consolidated PBT ₹16.25 Cr -86.7%YoY
  3. Order Book ₹3,380 Cr
  4. Active Order Book ₹2,100 Cr

What they filed

Q1 FY27: revenue up 24.1%, net profit up 409.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue769 766 804 694 822 +7%758 −1%933 +16%861 +24%
EBITDA32 36 58 14 44 +38%42 +17%70 +21%64 +357%
Net profit24 19 48 11 41 +71%15 −21%64 +33%56 +409%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹684 Cr Total
  • Textile Machinery Division (TMD) ₹439 Cr 64.2%
  • Machine Tool Division (MTD) & Foundry ₹206 Cr 30.1%
  • Aerospace (ATC) ₹39 Cr 5.7%

Guidance & targets

Volume

  • Active Order Book Execution Volume · next 12 months · Medium confidence ₹2100 crores
    we are looking at an active order book of around Rs 2100 odd crores... which we expect to get executed in the next 12 months.

    — V Senthil, CFO

Other

  • Autoconer Commercial Launch Other · Q4 FY25 · Medium confidence Q4 FY25
    By Q4, I think it will start, it is a soft launch at the moment... it will be post Jan 2025

    — V Senthil, CFO

  • Airjet Loom Launch Other · FY27 · Medium confidence FY 2025-2026
    Airjet, yes, it is in the works... during the year 2025-2026, it will be out.

    — V Senthil, CFO

Capacity

  • MTD Capacity Headroom Capacity · next 3 years · High confidence 30%
    with the existing capacities, existing assets what we have, we have headroom for 30% within this particular division

    — V Senthil, CFO

Risks & concerns

  • Japanese Yen Devaluation

    high

    Devalued Yen makes Japanese machine tool imports significantly cheaper, creating intense price pressure for LMW's MTD segment.

    Management acknowledged

  • Cyclical Downturn in Textiles

    high

    Low yarn demand, high cotton prices, and poor customer margins have led to a sharp dip in domestic demand and machine offtake.

    Both acknowledged

  • Geopolitical Instability

    medium

    Global geopolitical situations in operating countries have resulted in lower offtake of machines in the Middle East and international markets.

    Management acknowledged

Areas of evasion (2)

  • Specific volume dispatch numbers for textile machinery.
  • Specific market share percentages in the machine tool segment.

Q&A highlights

2 direct
UAE Subsidiary Investment Direct
We are trying to bring in a consolidated structure for holding subsidiaries under the Dubai entity. That is the substance for the investment plan of the holding company.

Explains the strategic rationale for a ₹200 crore investment in a UAE entity as a hub for international operations.

Asked by Chirag Jain

Machine Tool Division (MTD) Stagnation Partial
We are at a capacity utilization of somewhere from 64%-70% today, so, there is enough possibility for us to scale the business... we have headroom for 30% within this particular division.

Analysts are concerned that MTD revenue has been range-bound (₹200-250cr) for 12 quarters; management points to available capacity rather than specific growth targets.

Asked by Ritwik Sheth

Aerospace (ATC) Profitability Drop Direct
the composite division is incurring cost at the moment... That is the reason you see that dip in the profit and that is the cost which is taken up by composite division.

Clarifies that the 60%+ drop in ATC profit is due to deliberate investment in new composite capabilities rather than a decline in the core metallic business.

Asked by Chetan Doshi

2 min read 5 chapters

Detailed narrative

Textile Machinery Segment Faces Severe Headwinds

The Textile Machinery Division (TMD) experienced a 53.5% YoY revenue decline to ₹439 crores, swinging from an ₹82 crore profit to a ₹12.72 crore loss. Management attributed this to a 'sharp dip' in domestic demand caused by volatile cotton prices and poor margins for yarn manufacturers. Consequently, the company has reduced its working week to five days and initiated layoffs in April to align capacity with the current 45-50% utilization levels.

Order Book Bifurcation: Active vs. Inactive

While LMW reports a substantial total order book of ₹3380 crores, management clarified that only ₹2100 crores is considered 'active' (backed by 10% advances). This active portion is expected to be executed over the next 12 months. The remaining ₹1280 crores are inactive orders where customers have yet to commit to a delivery schedule, reflecting the broader capex slowdown in the textile industry.

Machine Tool Division (MTD) Resilience Amid Competition

MTD revenue stood at ₹206 crores, down from ₹243 crores YoY, but remains a key focus area with 64-70% capacity utilization. Management noted intense competition from Japanese imports due to the depreciated Yen, which has made foreign machines cheaper. Despite this, LMW is maintaining a 30% capacity headroom and focusing on innovation in machining centers for the EMS and auto sectors.

Aerospace Margins Compressed by Strategic Investments

The Aerospace (ATC) division maintained stable revenue at ₹39 crores, but profits fell 66% YoY to ₹1.5 crores. This margin compression is a result of deliberate investments in the new composite division, which is currently incurring costs during its stabilization phase. The metallic segment remains profitable and stable, with over 90% of the division's turnover coming from exports.

New Product Pipeline and International Strategy

LMW is betting on new technology to drive the next growth cycle, with a soft launch of the Autoconer currently underway and full commercialization expected by Q4 FY25. The Airjet loom is slated for a FY26 launch. Internationally, the company is consolidating its subsidiaries under a UAE-based holding structure, supported by a ₹200 crore investment, to better serve export markets.

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