Lokesh Machines soars 14% on healthy outlook; up 264% so far in 2023

Shares of Lokesh Machines (LML) surged 14 per cent on Thursday to a fresh high of Rs 383.50 on the BSE on the back of a healthy outlook.

So far in calendar year 2023, the stock has zoomed 264 per cent as compared to a 15.3 per cent rise in the BSE Sensex.

The company’s operations are segregated into two divisions namely Machines and Components division.

It is engaged in manufacturing of custom built Special Purpose Machines (SPMs), General purpose CNC Machines (GPMs), Jigs & Fixtures and Machining of automobile Cylinder Blocks, Heads and Connecting Rods, among others.

The Indian machine tools market is experiencing a boost from the growing emphasis on industrial automation, which is resulting in increased overall productivity and improved ergonomics.

Additionally, the growth is being bolstered by an increase in the number of small and medium-sized enterprises (SMEs), along with stringent evaluation criteria for product quality.

Machine tools’ manufacturers have a significant opportunity to increase their sales in emerging markets, which are expected to experience faster growth than developed markets and offer substantial untapped potential, the company said. 

The government has launched various initiatives such as 'Make in India' and 'Skill India' to encourage domestic manufacturing and enhance the skill set of the workforce.

In addition, the industry has benefitted from govt incentives, subsidies, and investments in R&D, it said in its FY23 annual report.

It added that India's automotive and aerospace industries are experiencing rapid growth, leading to a surge in demand for machine tools.

Opportunities have soared particularly in the field of high-precision and high-speed machining processes. India’s emergence as a hub for low-cost manufacturing has further stimulated the demand for machine tools, it said.

LML reported revenue of Rs 272.54 crore in FY23, up 19 per cent against the previous year. During FY24, it has crossed revenue of Rs 126 crore till September 2023 (H1FY24).

Going forward, analysts said the margins would remain in the range of 13-14 per cent and revenue’s upward trajectory is likely to continue.

Further, the company is currently undertaking capex to improve its production capacity from 900 to 1200 machines, which will lead to significant improvement in revenue from FY2025 onwards.

The financial risk profile of LML continues to be healthy with comfortable debt protection metrics and low gearing, as per Acuite Ratings & Research.

The clientele of the company includes Ashok Leyland Limite, Kirloskar Oil Engines Limited Mahindra and Mahindra, Seimens Financial Services Pvt Ltd, Oswal Pumps Limited and International Tractors Limited among others.

Acuite believes that the outlook of LML will remain 'Stable' over the medium term on account of the promoter’s extensive experience and established presence in the machine tool industry.

The outlook may be revised to 'Positive' in case the company registers significant growth in revenue and profitability while effectively managing its working capital cycle.

The outlook may be revised to 'Negative' in case of significantly lower than expected net cash accruals or lengthening of the working capital cycle; thereby resulting in deterioration in the financial risk profile or liquidity position of the company, Acuite said.