July 23, 2024
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Stock Market

Can Lokesh Machines maintain Net profit CAGR of 51% moving forward?

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Stock Market

Can Lokesh Machines maintain Net profit CAGR of 51% moving forward?

The Indian machine tool industry is one of the vital pillars of the industrial sector of Indian engineering. Machine tools are essential in various industries like automotive, consumer durables, aerospace, and healthcare. The demand for machine tools in India is largely driven by the automobile and consumer durables sectors.

As industries require more precise machine tools, they are set to expand, meeting the needs of sectors such as shipbuilding, electronics, and defence. This trend of rising demand for machine tools will continue to drive the industry’s growth in the coming years.

Machine Tools Industry Overview in India

India is a developing country in the world. In the machine tool industry, India is ranked eighth in terms of machine tool consumption and tenth in terms of production. It is a component of the capital goods sector and accounts for 12% of manufacturing output. In 2023, the Indian machine tool industry increased at a growth rate of 10.13% year over year. It is expected to grow from US $1.5 billion in FY23 to US $3.2 billion in the financial year 2032, which will grow at a compound annual growth rate (CAGR) of 8.2% during the period.

Company Overview Of Lokesh Machines

Lokesh Machines was incorporated on December 17, 1983, and started commercial operations in 1985 in Hyderabad. The company was promoted by M. Lokeswara Rao. It is among the top five machine tool manufacturers in India. Lokesh Machines Limited is a leading exporter of CNC machines from India to Japan, Germany, the Netherlands, Italy, Turkey, and Russia. It is also a leader in cam & crank borers, fine borers & finish milling machines.

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Lokesh Machine Limited has 6 state-of-the-art manufacturing units located across Hyderabad and Pune. It has reported more than 651 cumulative employee strengths and more than 5,000 client bases. The company has an export network in more than 7 countries. Lokesh Machine Limited offers more than 100 diversified product lines.

It owns more than 200 machines in single or multiple locations, both in the automotive and non-automotive sectors. The company’s top clients in the machine tools division are Wipro, Bajaj, Mahindra, Honda, Tata Motors, and Ashok Leyland.

Segment Analysis Of Lokesh Machines

Lokesh Machine Limited has engaged in the manufacturing of machine tools and components. In FY24, the company produced a machine tools division of 1400 units per year, an auto components division of 30,00,000 units per year, and a defence division of 12,000 units per year. It operates through 3 segments, such as general-purpose machines, special-purpose machines, and the auto components division.

In general-purpose machines, the company has divided the total work into 10% automobile OEM, 30% auto ancillaries, and 60% general industries and exports. In special purpose machines, Lokesh Machine has divided its total work into 90% automobile OEM and 10% general industries and exports. In the auto components division, the company is divided into 25% passenger vehicles, 25% commercial vehicles, and 50% tractors and off-road vehicles.

Lokesh Machine enters the Defence and Aerospace Division

Lokesh Machine Limited expanded into defence and aerospace components in the financial year 2020-22 and received a certification of AS9100 for the aerospace division. The company set up the first new division for the manufacturing of defence and aerospace components in FY23. It is the response to the Government of India’s call for an Aatma Nirbhar Bharat. In 2023, the company secured a license for small arms manufacturing from the Ministry of Home Affairs and delivered over 100 weapons to government agencies.

Lokesh Machine Limited is the first domestic private-public partnership with the Indian Army and AEDE (DRDPO) to jointly develop small arms segments for manufacturing ASMI 9x19mm machine pistols. The company has an order value of Rs. 4.26 crore to deliver the 550 ASMI 9x19mm submachine guns to the Northern Command of the Indian Army.

which is cheaper as compared to importing from foreigners. It also delivered the advanced ASMI 9x19mm machine pistols to the Central Armed Police Forces (CAPFs). The top clients of the defence division are Nothern Command, NSG, BSf, DRDO, and Assam Rifles.

Financial Analysis of Lokesh Machines

Looking at the financial parts, Lokesh Machine Limited has increased revenue from ₹239 crores in FY23 to ₹294 crores in FY24, which is growing by 23.01%. The revenue of the company has increased over the last five years and has grown at a compound annual growth rate of 23.59% for the last four years.

The net profit of Lokesh Machine Limited has surged from ₹10 crore in FY23 to ₹14 crore in FY24 and grew by 40% as compared to the previous year. The net profit of the company has risen over the last four years and has grown at a CAGR of 51.83% for the last three years.

The company’s operating profit margin has increased from 9.84% to 10.91% in FY24. The net profit margin has increased over the last four years, which is to be 4.71% in FY24. The ROE and ROCE of the company were 7.06% and 12.42%, respectively. The debt-to-equity ratio of Lokesh Machine Limited has climbed from 0.55x to 0.60x in FY24.