LMW - LMW Limited Share Price

In the Q1 earnings call for FY25-26, LMW Limited's management provided an optimistic but cautious outlook regarding their business segments. The company reported a total revenue of Rs 685 crores, reflecting a 4% increase from Rs 659 crores in the same quarter last year. However, the PBT rose significantly to Rs 32.5 crores compared to Rs 17.5 crores year-on-year, indicating improved profitability.

Management highlighted that the order book stands at approximately Rs 2,800 crores, with active orders ranging between 50-55%. Despite a decline in TMD revenues from Rs 440 crores to Rs 415 crores, the management reiterated the importance of maintaining a strong domestic market focus. TMD registered a loss of Rs 11 crores, improving slightly from Rs 12 crores last year.

Key forward-looking points included:

1. Mid-Term Capacity Utilization: Management indicated lower order inflows over the past eight quarters and projected that improvements might take another one to two quarters as the economic environment stabilizes.

2. New Product Launches: The company mentioned ongoing discussions for new product launches, like the Lakshmi Winder and Auto Piecer, with initial supplies already happening.

3. Geopolitical Impact: Global tariff uncertainty and geopolitical issues are affecting machine offtake, especially in international markets like Turkey and Bangladesh.

4. Defense Sector Participation: The ATC business is expanding, with a current order book of Rs 400 crores within the Indian defense sector, reflecting a commitment to localization.

5. Market Trends: Africa is emerging as a new spinning hub, and the management is positioning to capture opportunities in this region.

Overall, while there are improvements and opportunities for growth, management expressed caution regarding immediate performance metrics and potential revenue drivers.

Here are the major questions and their detailed answers from the Q&A section of the earnings transcript:

1. Question: "In TMD, what is domestic revenue share and what exports and sales compared to the current quarter, and what was the comparative number for the previous quarter? What is the active order book number? What is the loss in the Middle East for the current quarter? What is the export order book now compared to last year?"

Answer: "The revenue share in TMD stands at 65% domestic machines, 26% domestic spares, and 9% exports. Our current active order book is approximately Rs 2800 crores, with active orders around 50-55%. In the Middle East, the loss this quarter is around Rs 13 crores combined. For the export order book, it is nearing Rs 200 crores, but we face challenges executing this mainly due to LC backing."

2. Question: "Can you provide an update on the textile machinery business? Is there a better outlook for order inflows expected?"

Answer: "Domestically, mill utilization is high, maintaining spare parts sales, yet uncertainties in textile tariffs hinder new investments. While discussions on potential orders are ongoing, there has been no conversion into orders. Internationally, markets like Bangladesh and Turkey face similar challenges. We anticipate that clarity on tariffs may spur investments over the coming quarters, but significant changes aren't expected until then."

3. Question: "Regarding MTD, can you detail the current business margins and the outlook moving forward?"

Answer: "Currently, our MTD margins are lower at 5% due to the introduction of new machines and increased overheads from expanding our capacity. Historically, we operated around 13-14% margins. To regain these margins, we will need increased capacity utilization and a more favorable revenue mix. We remain focused on growing our sales volume, particularly in VMCs and HMCs, to improve profitability."

4. Question: "What steps are being taken to capitalize on Africa as a new spinning hub?"

Answer: "We are focusing on exports and have established an assembly facility in Dubai for quicker service to African customers, particularly in Egypt. With increased cotton output and investments from countries like China and Turkey, we are well-positioned to capture this growing market. Our strategy includes servicing these markets effectively while ensuring quality and support for our products."

5. Question: "Has there been progress with new product introductions like the Lakshmi Winder and the 5-axis CNC machine?"

Answer: "The Lakshmi Winder has started commercial supplies to select customers, and we aim to increase production volume as it gains traction. However, we have not made significant sales yet for the 5-axis CNC machine since its launch earlier this year, but the technology is available and we expect growth in this area moving forward."