Higher Volumes Help Lml

The stock price went up 48 per cent to Rs 52 from Rs 35 within three weeks prior to the announcement of the results. Indeed, LMLs results deserve such warm welcome.

Despite a lower other income and provision of extraordinary items worth Rs 4.35 crore, profit for the first half stood at Rs 17.20 crore, up 112 per cent from previous years figure of Rs 8.16 crore. Higher volume has been the prime reason for the improved performance.

Significantly, sales grew at a higher pace. For the six months ended March 1997, sales stood at Rs 363.94 crore, showing an increase of 25.6 per centhigher than 1995-96 annual growth of 20 per cent.

Volumes growth has also been higher. As compared with an annual growth of 12 per cent during 1995-96, volumes in the first half of 1997 grew by 15 per cent. For the six months ended March 1997, the company sold 1.42 lakh vehicles.

With control over costs, the company has managed to record a significant jump in its margins. In the first half of 1997, operating profit margins stood at 34.73 per cent, up from 6.33 per cent in the corresponding period of the previous year. For the second half, with higher capacity, volumes are expected to be higher.

The company increased its capacity a few months back from 2 lakh vehicles to 3 lakh vehicles. After the completion of the second phase of expansion, which is under implementation, the capacity would go up to 4 lakh vehicles.

This would further increase to 6 lakh vehicles by the end of 1998. By giving the company advantages of economy of scale, these expansions would help LML in the long run.

However, the factor which may hurt investor sentiment is the companys money-raising programme. The company may come out with a Rs 100-crore rights/public issue to fund the expansion.