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    LMW

    LMWMixed
    Capital Goods·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

    8
    • 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

    2
    • Japanese Yen Devaluation

    • Cyclical Downturn in Textiles

    Key financials

    Single quarter

    04 metrics
    1. 01Revenue₹636 Cr-39.7%YoY
    2. 02Consolidated PBT₹16.25 Cr-86.7%YoY
    3. 03Order Book₹3,380 Cr
    4. 04Active Order Book₹2,100 Cr

    Segment breakdown

    • Textile Machinery Division (TMD)₹439 Cr64.2%
    • Machine Tool Division (MTD) & Foundry₹206 Cr30.1%
    • Aerospace (ATC)₹39 Cr5.7%
    Donut· Share of Revenue

    Guidance & targets

    4
    CategoryTargetPriority
    Volume
    Active Order Book Execution
    ₹2100 crores
    Medium
    Other
    Autoconer Commercial Launch
    Q4 FY25
    Medium
    Other
    Airjet Loom Launch
    FY 2025-2026
    Medium
    Capacity
    MTD Capacity Headroom
    30%
    High

    Risks & concerns

    5
    RiskSeverity

    Japanese Yen Devaluation

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

    high

    Cyclical Downturn in Textiles

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

    high

    Geopolitical Instability

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

    medium

    Areas of Evasion(2)

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

    Q&A highlights

    3

    “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

    2 min read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.