Despite the sequential improvement, the company's stock has remained under pressure, trading at ₹15,847.75 as of November 6, 2025, reflecting investor concerns about sustainability of earnings and premium valuation multiples. The shares have declined 3.78% over the past year, significantly underperforming the Sensex's 3.77% gain during the same period.
The September quarter results present a tale of two narratives. On one hand, the company achieved its highest-ever quarterly revenue of ₹821.88 crores, marking an 18.40% sequential improvement from Q1 FY26's ₹694.14 crores. On the other hand, the operating profit margin excluding other income remained anaemic at just 5.36%, a far cry from the double-digit margins the company commanded in its heyday.
| Quarter | Revenue (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | OPM (%) | PAT Margin (%) |
|---|---|---|---|---|---|---|
| Sep'25 | 821.88 | +18.40% | 40.92 | +256.76% | 5.36% | 4.98% |
| Jun'25 | 694.14 | -13.62% | 11.47 | -76.01% | 1.98% | 1.65% |
| Mar'25 | 803.63 | +4.85% | 47.82 | +147.77% | 7.21% | 5.95% |
| Dec'24 | 766.43 | -0.33% | 19.30 | -21.10% | 4.67% | 2.52% |
| Sep'24 | 768.99 | +14.27% | 24.46 | +121.96% | 4.19% | 3.18% |
| Jun'24 | 672.96 | -30.67% | 11.02 | -83.30% | 1.97% | 1.64% |
| Mar'24 | 970.65 | — | 65.98 | — | 7.57% | 6.80% |
Financial Performance: Recovery Built on Fragile Foundations
The Q2 FY26 performance shows LMW's characteristic volatility, with net sales climbing to ₹821.88 crores from ₹694.14 crores in the previous quarter. The 18.40% sequential growth represents the company's strongest quarterly revenue figure, surpassing even the traditionally robust March quarter performance. Year-on-year revenue growth of 6.88% over Q2 FY25's ₹768.99 crores, whilst positive, remains modest for a company operating in capital goods manufacturing.
The profit recovery, whilst impressive in percentage terms, needs contextualisation. Net profit of ₹40.92 crores in Q2 FY26 rebounded sharply from Q1 FY26's dismal ₹11.47 crores, but remains substantially below the ₹65.98 crores reported in Q4 FY24. The 67.29% year-on-year growth over Q2 FY25's ₹24.46 crores demonstrates improvement, yet the absolute profit levels remain constrained relative to the revenue base.
Operating profit before depreciation, interest, and tax (excluding other income) stood at ₹44.05 crores in Q2 FY26, translating to an operating margin of merely 5.36%. Whilst this represents a 338 basis point improvement from Q1 FY26's 1.98% and a 117 basis point gain over Q2 FY25's 4.19%, it remains alarmingly low for a manufacturing business. Historical data reveals the company generated operating margins above 9% in FY23 and FY24, underscoring the current margin compression.
The gross profit margin of 10.35% in Q2 FY26, whilst improved from Q1 FY26's 7.07%, remains under pressure. Employee costs of ₹98.60 crores stayed relatively stable, representing 12.00% of revenue. Depreciation charges of ₹30.16 crores continued their upward trajectory, reflecting ongoing capital investments but also adding to the fixed cost burden.
A concerning aspect of the results is the elevated tax rate of 25.49% in Q2 FY26, which, whilst lower than Q1 FY26's unusual 41.27%, remains above the company's historical average of around 22-24%. This resulted in a tax charge of ₹14.00 crores on a profit before tax of ₹54.92 crores, eroding the bottom line improvement.
Operational Challenges: The Other Income Dependency
A critical red flag in LMW's financial performance is its heavy reliance on other income to bolster profitability. In Q2 FY26, other income stood at ₹41.03 crores, representing an alarming 74.71% of profit before tax. This dependency on non-operating income masks the underlying weakness in core manufacturing operations.
The company's other income of ₹41.03 crores in Q2 FY26, up from ₹36.60 crores in Q1 FY26 and ₹29.69 crores in Q2 FY25, likely comprises investment income, interest on deposits, and other treasury operations. Whilst such income is legitimate, its disproportionate contribution to profitability raises questions about the sustainability of earnings and the health of core operations.
Critical Concern: Other Income Dependency
Other income constitutes 74.71% of profit before tax in Q2 FY26, indicating that the company's core manufacturing operations are generating minimal profits. Operating profit before other income was merely ₹13.89 crores, highlighting severe margin pressures in the textile machinery and CNC machine tools business.
The company's return on equity (ROE) has deteriorated to just 3.69% on a trailing basis, down from the five-year average of 9.46%. This weak ROE, significantly below the cost of equity for most investors, signals poor capital efficiency and raises questions about value creation. Similarly, return on capital employed (ROCE) stands at a meagre 2.50% on a trailing basis, compared to the five-year average of 13.99%, indicating that the company is barely generating returns above its cost of capital.
On the positive side, LMW maintains a debt-free balance sheet with zero interest costs, providing financial flexibility. The company's shareholder funds stood at ₹2,777.42 crores as of March 2025, with a book value per share of ₹2,600.58. Cash and cash equivalents reached a record ₹14,091.50 crores on a half-yearly basis, demonstrating strong liquidity.
Working Capital Strain: Efficiency Concerns Mount
A deeper examination of LMW's operational efficiency reveals troubling trends in working capital management. The debtors turnover ratio has declined to a concerning 1.33 times on a half-yearly basis, representing the lowest level in recent periods. This deterioration indicates that the company is taking longer to collect payments from customers, potentially signalling weak demand conditions or aggressive credit policies to secure orders.
Trade payables stood at ₹521.54 crores as of March 2025, down from ₹530.31 crores in the previous year, suggesting the company may be reducing supplier credit. Current assets of ₹2,640.34 crores against current liabilities of ₹1,006.01 crores provide a comfortable current ratio of 2.62, indicating adequate short-term liquidity. However, the trend in working capital efficiency warrants close monitoring.
Balance Sheet Strength Amidst Operational Weakness
Whilst LMW's profit margins remain under severe pressure, the company maintains a fortress balance sheet with zero debt, net cash position, and shareholder funds exceeding ₹2,777 crores. This financial strength provides a cushion to navigate the current operational challenges, but also raises questions about capital allocation efficiency given the weak returns on equity and capital employed.
Industry Context: Capital Goods Sector Headwinds
LMW operates in the industrial manufacturing sector, specifically focusing on textile spinning machinery, CNC machine tools, heavy castings, and aerospace components. The company holds a leadership position as the largest player in its sector with a market capitalisation of ₹16,930 crores, but faces significant headwinds from subdued capital expenditure in the textile industry.
The textile machinery segment, which forms LMW's core business, has witnessed muted demand as textile mills grapple with weak export orders, inventory pile-ups, and cautious capital spending. The company's revenue volatility across quarters reflects the lumpy nature of capital goods orders, where large project wins can significantly impact quarterly performance.
The CNC machine tools division faces intense competition from Chinese manufacturers offering products at significantly lower price points, pressuring both volumes and margins. The aerospace components business, whilst promising, remains a relatively small contributor to overall revenue. The heavy castings segment provides some diversification but is also cyclical in nature.
Looking at the five-year performance, LMW has delivered sales growth of 19.40% annually and EBIT growth of 19.63% annually, which appear respectable. However, this growth came off a very low base following the COVID-19 pandemic, and the recent quarters suggest this growth trajectory is unsustainable at current margin levels.
Peer Comparison: Valuation Premium Unjustified
When compared to peers in the industrial manufacturing space, LMW's valuation appears stretched relative to fundamentals. The company trades at a price-to-earnings ratio of 140.30 times trailing twelve-month earnings, substantially higher than most peers and the industry average of 81 times.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield (%) |
|---|---|---|---|---|---|
| LMW | 140.30 | 6.08 | 9.46 | -0.62 | 0.19 |
| Kaynes Technology | 118.35 | 15.78 | 9.21 | -0.05 | — |
| Honeywell Automation | 63.70 | 8.07 | 14.08 | -0.82 | 0.28 |
| Jyoti CNC Automation | 63.52 | 12.68 | 14.90 | 0.22 | — |
| Syrma SGS Technology | 74.61 | 8.61 | 8.26 | 0.18 | 0.19 |
| Jupiter Wagons | 42.38 | 4.97 | 14.18 | -0.08 | 0.31 |
LMW's P/E ratio of 140.30 times significantly exceeds peers such as Honeywell Automation (63.70 times), Jyoti CNC Automation (63.52 times), and Jupiter Wagons (42.38 times). This valuation premium appears unjustified given LMW's inferior ROE of 9.46% compared to Honeywell's 14.08%, Jyoti CNC's 14.90%, and Jupiter Wagons' 14.18%.
The price-to-book ratio of 6.08 times is lower than some peers like Kaynes Technology (15.78 times) and Jyoti CNC (12.68 times), but remains elevated given the weak return ratios. The dividend yield of just 0.19% provides minimal income support to shareholders, with the company paying ₹30 per share annually.
LMW's net cash position (negative debt-to-equity of -0.62) provides some justification for a valuation premium over leveraged peers, but cannot alone support the current multiple. The company's market leadership in textile machinery also commands some premium, but operational performance must improve to justify current valuations.
Valuation Analysis: Expensive on All Metrics
LMW's current valuation of ₹15,847.75 per share appears stretched across multiple parameters. The stock trades at a P/E ratio of 140.30 times trailing earnings, an EV/EBITDA multiple of 100.07 times, and an EV/EBIT ratio of 448.85 times—all indicating significant overvaluation relative to earnings power.
The company's proprietary valuation assessment classifies it as "VERY EXPENSIVE", a grade it has held since September 2024 with only brief interludes. The valuation grade history shows the stock moved from "Fair" to "Expensive" in March 2024 and subsequently to "Very Expensive" by September 2024, reflecting the disconnect between price appreciation and fundamental performance.
The stock's 52-week range of ₹13,456.85 to ₹18,190.00 shows significant volatility, with the current price sitting 12.88% below the high and 17.77% above the low. The stock has declined 10.33% year-to-date, underperforming the Sensex's 6.75% gain by a substantial margin.
Historical price performance reveals concerning trends. Over the past year, LMW has delivered a negative return of -3.78% compared to the Sensex's positive 3.77% return, resulting in negative alpha of -7.55%. The three-year return of 21.58% significantly lags the Sensex's 36.85% gain, indicating persistent underperformance. However, longer-term returns remain strong, with five-year gains of 291.02% and ten-year returns of 346.42%, reflecting the company's historical strength.
Shareholding Pattern: Institutional Caution Evident
An analysis of shareholding patterns reveals interesting dynamics in investor sentiment towards LMW. Promoter holding has declined marginally from 31.13% in March 2025 to 30.80% in September 2025, with a 0.33 percentage point reduction occurring in the June 2025 quarter. Whilst the absolute change is small, any promoter stake reduction warrants attention.
| Quarter | Promoter | QoQ Change | FII | QoQ Change | MF | QoQ Change | Insurance |
|---|---|---|---|---|---|---|---|
| Sep'25 | 30.80% | 0.00% | 5.53% | -0.28% | 2.88% | -0.08% | 6.83% |
| Jun'25 | 30.80% | -0.33% | 5.81% | -0.10% | 2.96% | +0.16% | 6.83% |
| Mar'25 | 31.13% | 0.00% | 5.91% | +0.28% | 2.80% | -0.49% | 6.83% |
| Dec'24 | 31.13% | 0.00% | 5.63% | +0.14% | 3.29% | -0.15% | 6.87% |
| Sep'24 | 31.13% | — | 5.49% | — | 3.44% | — | 7.16% |
Foreign institutional investor (FII) holding has shown a declining trend, falling from 5.91% in March 2025 to 5.53% in September 2025. The sequential decline of 0.28 percentage points in the September quarter suggests foreign investors are reducing exposure, possibly concerned about valuation and operational performance.
Mutual fund holdings have also declined from 3.44% in September 2024 to 2.88% in September 2025, with a 0.08 percentage point reduction in the latest quarter. This steady reduction in domestic institutional ownership indicates that professional fund managers are not finding value at current levels. Insurance company holdings have remained stable at 6.83%, providing some institutional anchor.
The non-institutional category, comprising retail and non-institutional investors, has increased from 52.75% in September 2024 to 53.88% in September 2025, suggesting that retail investors have been accumulating shares even as institutions reduce exposure. This divergence between retail enthusiasm and institutional caution is often a warning sign.
Stock Performance: Consistent Underperformance
LMW's stock price performance has been disappointing across most timeframes, with the shares consistently underperforming the broader market. The stock has generated negative alpha across one-year, two-year, and three-year periods, indicating structural underperformance rather than temporary weakness.
| Period | LMW Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +0.50% | -1.18% | +1.68% |
| 1 Month | +7.93% | +1.98% | +5.95% |
| 3 Months | +3.14% | +3.56% | -0.42% |
| 6 Months | +0.30% | +3.44% | -3.14% |
| YTD | -10.33% | +6.75% | -17.08% |
| 1 Year | -3.78% | +3.77% | -7.55% |
| 2 Years | +20.72% | +28.41% | -7.69% |
| 3 Years | +21.58% | +36.85% | -15.27% |
| 5 Years | +291.02% | +99.11% | +191.91% |
The year-to-date performance is particularly concerning, with LMW declining 10.33% whilst the Sensex gained 6.75%, resulting in negative alpha of -17.08 percentage points. The one-year return of -3.78% compares unfavourably with the Sensex's 3.77% gain, and the three-year return of 21.58% significantly lags the benchmark's 36.85% advance.
Technical indicators paint a mixed picture. The stock is currently classified as "MILDLY BEARISH" after changing from "BEARISH" on October 15, 2025. The stock trades above all key moving averages (5-day, 20-day, 50-day, 100-day, and 200-day), which provides some technical support. However, the weekly MACD shows "Mildly Bullish" signals whilst the monthly MACD indicates "Mildly Bearish" trends, suggesting lack of clear directional momentum.
The stock's beta of 1.35 indicates high volatility, with price movements 35% more volatile than the broader market. The one-year volatility of 28.48% is more than double the Sensex's 12.45%, classifying LMW as a "MEDIUM RISK LOW RETURN" investment—an unattractive risk-reward profile for most investors.
"LMW's persistent underperformance across one, two, and three-year periods, combined with deteriorating operational metrics and expensive valuation, suggests the stock is trapped in a value-destructive cycle that warrants investor caution."
Investment Thesis: Quality Concerns Outweigh Balance Sheet Strength
The investment case for LMW presents significant challenges across multiple dimensions. The company's proprietary Mojo Score of just 27 out of 100 with a "STRONG SELL" rating reflects the confluence of negative factors impacting the stock. This score has remained in the "SELL" to "STRONG SELL" range since April 2025, indicating persistent fundamental weaknesses.
The four-pillar Mojo analysis reveals critical concerns. Near-term drivers show mixed signals, with quarterly financial trends turning positive in Q2 FY26 but technical indicators remaining mildly bearish. The quality assessment rates the company as "AVERAGE", downgraded from "GOOD" in May 2025, reflecting deteriorating return ratios and operational efficiency. Valuation remains "VERY EXPENSIVE" across all metrics, and the overall assessment points to a challenging investment proposition.
The company's key strengths include its market leadership position in textile machinery, zero-debt balance sheet, strong cash reserves exceeding ₹14,000 crores, diversified business model spanning textiles, CNC machines, castings, and aerospace, and promoter group with long-standing industry expertise. Additionally, the company has demonstrated ability to generate positive cash flows from operations and maintains a conservative dividend policy with a payout ratio of 21.44%.
However, these strengths are overwhelmed by significant concerns. Operating margins remain severely compressed at just 5.36%, indicating intense competitive pressures or inefficient operations. The heavy dependence on other income (74.71% of PBT) masks core business weakness. Return on equity of 3.69% and ROCE of 2.50% on a trailing basis are woefully inadequate, destroying shareholder value. The deteriorating debtors turnover ratio signals working capital stress. Consistent underperformance versus the Sensex over one, two, and three-year periods reflects market scepticism. The expensive valuation with P/E of 140 times leaves no margin of safety. Declining institutional ownership suggests professional investors are losing confidence. High beta of 1.35 indicates above-average volatility risk.
Key Strengths & Risk Factors
KEY STRENGTHS
- Market leadership in textile machinery with established brand reputation
- Zero-debt balance sheet providing financial flexibility and resilience
- Strong cash reserves exceeding ₹14,000 crores on half-yearly basis
- Diversified revenue streams across textiles, CNC, castings, and aerospace
- Long-term sales CAGR of 19.40% over five years
- Experienced promoter group with deep industry knowledge
- No promoter pledging demonstrating confidence
KEY CONCERNS
- Operating margins compressed to just 5.36%, far below historical levels
- Other income dependency (74.71% of PBT) masking core business weakness
- ROE of 3.69% and ROCE of 2.50% destroying shareholder value
- Deteriorating debtors turnover ratio indicating collection challenges
- Consistent underperformance vs Sensex over 1Y, 2Y, 3Y periods
- Expensive valuation with P/E of 140x and EV/EBITDA of 100x
- Declining FII and MF holdings signalling institutional exit
- High volatility (beta 1.35) with medium risk, low return profile
- Weak demand environment in textile machinery segment
Outlook: What to Watch
POSITIVE CATALYSTS
- Sustained improvement in operating margins above 8-9%
- Reduction in other income dependency below 40% of PBT
- ROE improvement above 12% demonstrating better capital efficiency
- Large order wins in textile machinery or CNC segments
- Successful diversification into aerospace components
- Valuation correction bringing P/E below 80 times
RED FLAGS
- Further margin compression below 5% in coming quarters
- Continued reliance on other income exceeding 70% of PBT
- Additional decline in institutional holdings
- Working capital deterioration with debtors turnover below 1.2x
- Inability to sustain quarterly profits above ₹40 crores
- Further promoter stake reduction
The forward outlook for LMW remains challenging. The textile machinery industry faces structural headwinds from weak export demand, overcapacity in the textile sector, and cautious capital expenditure by mills. The CNC machine tools segment confronts intense competition from Chinese manufacturers. Whilst the aerospace components business offers long-term promise, it remains too small to materially impact overall performance.
For the company to re-rate positively, it must demonstrate sustained margin improvement, reduce dependence on other income, improve return ratios, and justify its premium valuation through operational excellence. Until these improvements materialise, the stock appears to offer limited upside potential with significant downside risk.
The Verdict: Avoid Despite Balance Sheet Strength
Score: 27/100
For Fresh Investors: Avoid initiation at current levels. The stock trades at extremely expensive valuations (P/E 140x, EV/EBITDA 100x) with deteriorating operational metrics, compressed margins of just 5.36%, and weak return ratios (ROE 3.69%, ROCE 2.50%). The heavy reliance on other income (74.71% of PBT) masks core business weakness. Wait for substantial valuation correction below ₹12,000 or significant operational improvement before considering entry.
For Existing Holders: Consider reducing positions on any price strength. The stock has consistently underperformed the Sensex across one, two, and three-year periods, with negative alpha of -7.55%, -7.69%, and -15.27% respectively. Declining institutional ownership and deteriorating quality grade from "Good" to "Average" signal professional investors are losing confidence. The fortress balance sheet provides downside protection but cannot justify current valuations given operational performance. Book partial profits and reallocate to higher-quality opportunities.
Fair Value Estimate: ₹11,500-12,500 (27-20% downside from current levels)
Note— ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
