*Lakshmi Machine Works Ltd - Management Call Highlights*
*Textile Machinery Division:*
Order book is about Rs.1,400 Cr of which 30-35% would be active order book, *up from 20-25% few months ago.*
Most of the mills are back in operations and export of yarn has also picked up quite well.
Customers have re-started project discussion and expansion plans.
Order book has started to build up in Textile Machinery; however, 4QFY21 will show a clear picture of the capital expansion plans of the customers.
*Textile Machinery utilisation is at 60-65%.* Demand for spares have improved meaningfully over last 6 months.
Yarn and Garment exports from India is picking up which is a positive sign for the company’s customers.
*Many textile companies are earning super normal profits* and many are recovering losses that were suffered over a period of time during slowdown due to improved spread and uptick in demand.
*Machine Tools Division:*
Company is witnessing robust demand in Machine tools segment and has an order book with visibility of 3 months (normally 2 months)
Getting equal traction from Auto & Non-Auto Sector in this division.
Witnessing meaningful traction in exports rather than domestic market. This segment is also seeing benefit from China +1 strategy.
Defence & Aviation sectors have taken a back seat.
Capacity utilisation of this division would be upward of ~80%
*Other Highlights*
India is been seen as a potential substitution to China for sourcing by other Eastern & Western countries as part of China+1 strategy .
China has around 120mn spindle capacity and India has 50mn spindles capacity. Bangladesh is close to 15m spindles market and Vietnam is 5mn spindles market.
Export enquiry have also picked up as markets like Bangladesh, Vietnam , Pakistan , Turkey , Uzbekistan have also benefited from diversification from China. Bangladesh is the largest market for LMW. However lot of export order have adverse credit terms and LMW is selective in picking orders.
Irrespective of subsidies, if demand improves and continues for more than 6-12 months, the sector will see capacity expansion in near future.
Textile players will take benefit of PLI scheme as most players are running at full capacity and will need expansion, also low tax rate will also improve economics.
Government has provided lot of support to sector like MSME classification, PLI, reduction in custom duty for input of man made fibre, support during COVID through various liquidity measure.