Stock Review: Lakshmi Electrical Control

This is a Lakshmi Machine Works (LMW) group company where they make the low voltage stabilizer as well as the plastic machinery parts. The parts for plastic machineries are largely catered to the Lakshmi Machine Works and the low voltage stabilizers have a huge demand.

In fact, this company had some difficulty for FY09 and FY10 because of their 100% subsidiary of a spinning unit which they have hived off. Post that, the company has been doing quite well especially on this low voltage stabilizer.

If we go by their H1 performance, they have a topline of close to about Rs 60 crore and they have posted an EPS of close to about Rs 22 on a very tiny equity of Rs 2.5 crore. The company is debt free. They have the loans and advances given to their subsidiary to the extent of about Rs 10 crore.

If we take the present marketcap of just Rs 80 crore against the expected topline of about Rs 125 crore for FY11 with expected EPS of 46, I think the stock looks quite undervalued. Going forward for FY12,

If this company falls in the smallcap capital goods kind of company where they deserve a P/E multiple of at least 9-10 times as against the larger ones, who are ruling at a P/E multiple of 25-30, you have a very limited downside with a good potential to grow in the next 12 months.