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| 2/6/2013 9:00 PM Wednesday

LAKSHMI MACHINE WORKS

I am holding 150 shares of Lakshmi Machine Works purchased at Rs 1600 per share. Should I hold these or book profits?
Anand Meshram, Via Email

BPP

BSE/NSE Code 500252/LAXMIMACH
Face Value Rs 10
CMP Rs 2125
52-Week High/Low Rs 2336/Rs 1498
Current Profit/(Loss) 32.81 per cent

It is always a good idea to buy a stock when it is at its low and sell it when it is at its peak. This is no rocket science, but a general investing principle. Almost all investors try to stick to it in a bid to create wealth, but only a few succeed. Why are we bringing up this gyan instead of answering your query? Well, you have bought a stock at a price which is very close to its 52-week low. This essentially fulfills the first part of the criteria stated above. Now, will you be able to fulfill the second part as well? Here is the answer.

The company you have invested in, Lakshmi Machine Works, is a textile machines manufacturer. It is among the three companies globally to offer an entire range of machinery to textile manufacturers. Apart from textile machinery, it also has a foundry division that provides ductile iron and grey iron castings primarily for wind mills. The company’s advanced technology center division provides aerospace components, including engine parts, landing gear and structural parts. This lends the company a flavor of being a diversified engineering conglomerate.

Its financial results for the recently concluded December quarter of 2012 have not been very encouraging. The company’s topline witnessed a decline of 27.52 per cent on a YoY basis to stand at Rs 376.81 crore as against Rs 519.90 crore and its bottomline declined by a huge 48.65 per cent to Rs 20.36 crore against Rs 39.65 crore for Q3FY12. On the valuations front, the stock discounts its trailing 12-month earnings by 26.91x. The bottomline has been declining consistently for the last three quarters. A bad set of Q3FY13 results has seen the stock getting hammered ever since the numbers came out.

With regard to your investment, there is a good margin of safety between the current price and the price at which you had entered the counter. You could well book partial profits in the counter and sit safe to see if the company bounces back over the next quarter.

 

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