With a resilient INR 921 crore order book, (3X FY23 sales), Lloyds
Engineering Works Ltd (LEWL) envisions substantial growth, particularly
in Marine and Civil projects, promising heightened revenue and profit
margins. Strategically investing in capacity enhancement, LEWL solidifies
its financial position as a net cash entity.
Poised to thrive in the infrastructure and capex sector, LEWL strategically
aligns with the anticipated surge in government spending, demonstrating
a keen foresight in capitalizing on opportunities within this burgeoning
industry. Furthermore, through strategic technological collaborations
with industry leaders like The Material Works, Ltd. (TMW), Bhabha Atomic
Research Centre (BARC), and TB Global Technologies Ltd (TBG), LEWL is
poised to innovate and diversify its product portfolio, ensuring a
competitive edge in the evolving market landscape. LEWL is set to issue
6.34 crore equity shares, raising INR 99 cr at a price of 15.5 per share. The
purpose of this issuance is to secure funds for working capital needs.
We expect revenues to grow at a CAGR of 47% to INR 996cr.This
stupendous growth in revenue is expected from:-
• Higher order inflow from marine, steel and special civil engineering
projects.
• LEWL’s Strategic Capacity Boost for Future Revenue Growth
• Strategic positioning in the infrastructure and capex sector,
aligning with a government spending surge
LEWL’s EBITDA and PAT are expected to grow at a CAGR of 59%/66% to INR
209/168 cr respectively. EBITDA and PAT margins are expected to enhance
by 430/500 bps to 21%/16.8% respectively. Subsequently ROE and ROCE
are expected to enhance by 610/750 bps to 24.9%/22.9% respectively
We initiate coverage on LEWL at the CMP of INR 44 per share (28.3X FY26
P/E) with a price target of INR 71 (47x FY26 P/E) per share, representing an
upside potential of 61.4% in the next 24 months
Financial analysis and projections
FY21-23: Remarkable Revenue Growth and Operational Turnaround
Revenues
The company experienced a 111% CAGR in revenues, increasing from INR 70 crore in FY21
to INR 313 crore in FY23
Margins and Profits
Although the company faced operating margin challenges and incurred an EBITDA loss
of INR 10 crore in FY21. The loss was mainly on account of the economic slowdown as a
consequence of the COVID-19 pandemic. It successfully reversed this trend in FY22,
achieving an EBITDA of INR 5 crore, and further improved to INR 52 crore in FY23.
FY23-26E: Diversification, technological alliances, and capacity enhancement
for Enhanced revenues and returns
Revenues
We expect revenues to grow at a CAGR of 47% to INR 996cr.This stupendous growth in
revenue is expected from
Higher order inflow from marine, steel and special civil engineering projects.
• LEWL’s exclusive technical tie-up with The Material Works co (TMW) for Eco
Pickled Surface (EPS Gen 4) Technology grants a competitive edge, allowing
LEWL to capture a larger market share in India and Bangladesh by offering
advanced, eco-friendly pickling solutions, driving revenue growth.
• The strategic agreement with TB Global Technologies, Japan, positions LEWL to
expand its product offerings, tap into a broader market, and contribute to
Atmanirbhar Bharat, fostering revenue growth through diversified solutions and
increased market share.
• LEWL’s Desalination technology deal with BARC opens up a new revenue stream
with long-term order potential
LEWL’s Strategic Capacity Boost for Future Revenue Growth
LEWL’s strategic capacity enhancement through a INR 40 crore investment in FY23
signifies a forward-thinking approach, boosting its capability to meet growing demand
and drive revenue growth
EBITDA and PAT
LEWL’s EBITDA and PAT are expected to grow at a CAGR of 59%/66% to INR 209/168 cr
respectively. EBITDA and PAT margins are expected to enhance by 430/500 bps to
21%/16.8% respectively.
Return ratios
Subsequently ROE and ROCE are expected to enhance by 610/750 bps to 24.9%/22.9%
respectively
Note: No recommendation, pl do your own study; Not Invested