The December quarter results reveal a company navigating through turbulent waters, with net sales of ₹50.73 crores revealing marginal sequential growth of 0.59% but declining 2.05% year-on-year. Operating margins remain healthy at 18.79%, yet the company’s ability to translate operational efficiency into bottom-line growth remains constrained by elevated interest costs and a capital-intensive business model that demands continuous investment.
Net Profit (Q3 FY26)
₹0.63 Cr
QoQ: Flat | YoY: +84.63%
Net Sales (Q3 FY26)
₹50.73 Cr
QoQ: +0.59% | YoY: -2.05%
Operating Margin
18.79%
vs Q2: 19.06% | vs Q3 FY25: 1.89%
Average ROE
4.37%
Below indusattempt standards
| Metric | Dec’25 | Sep’25 | Jun’25 | Mar’25 | Dec’24 | Sep’24 | Jun’24 |
|---|---|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 50.73 | 50.43 | 48.05 | 38.69 | 51.79 | 75.32 | 62.53 |
| QoQ Growth | +0.59% | +4.95% | +24.19% | -25.29% | -31.24% | +20.45% | — |
| YoY Growth | -2.05% | -33.05% | -23.16% | — | — | — | — |
| Net Profit (₹ Cr) | 0.63 | 0.63 | 0.46 | 0.13 | -4.10 | 3.45 | 1.03 |
| Operating Margin | 18.79% | 19.06% | 17.92% | 18.89% | 1.89% | 16.12% | 12.86% |
| PAT Margin | 1.24% | 1.25% | 0.96% | 0.34% | -7.92% | 4.58% | 1.65% |
Financial Performance: Stabilisation Amidst Revenue Headwinds
Lokesh Machines’ Q3 FY26 performance reflects a company in transition, demonstrating operational resilience whilst grappling with top-line pressures. Net sales of ₹50.73 crores represent a marginal sequential improvement of 0.59% over Q2 FY26’s ₹50.43 crores, yet the year-on-year comparison reveals a 2.05% decline from December 2024’s ₹51.79 crores. More concerning is the nine-month performance for FY26, with cumulative sales of ₹149.21 crores representing a substantial contraction from the corresponding period’s stronger base.
The company’s operating profit margin excluding other income stood at 18.79% in Q3 FY26, demonstrating commconcludeable cost management despite revenue pressures. This represents a slight sequential decline from Q2’s 19.06% but marks a dramatic improvement from the distressed 1.89% margin recorded in December 2024. The operating profit of ₹9.53 crores in Q3 FY26 remained virtually flat compared to Q2’s ₹9.61 crores, indicating stable operational efficiency at current revenue levels.
However, the journey from operating profit to net profit reveals the company’s structural challenges. Interest costs of ₹4.75 crores in Q3 FY26, whilst marginally lower than Q2’s ₹5.01 crores, continue to consume a significant portion of operating profits. Depreciation charges of ₹4.00 crores further erode profitability, leaving profit before tax at a modest ₹0.93 crores. After tax provisions of ₹0.31 crores at an effective rate of 33.33%, net profit settled at ₹0.63 crores, translating to a PAT margin of merely 1.24%.
Revenue (Q3 FY26)
₹50.73 Cr
QoQ: +0.59% | YoY: -2.05%
Net Profit (Q3 FY26)
₹0.63 Cr
QoQ: Flat | YoY: +84.63%
Operating Margin
18.79%
Q2: 19.06% | Q3 FY25: 1.89%
PAT Margin
1.24%
Q2: 1.25% | Q3 FY25: -7.92%
Operational Challenges: Weak Returns Signal Capital Efficiency Concerns
The company’s return metrics paint a sobering picture of capital efficiency challenges. Average Return on Equity (ROE) of 4.37% falls significantly below acceptable thresholds for manufacturing businesses, indicating that the company generates insufficient returns for shareholders relative to the equity capital deployed. This weak ROE reflects both thin profit margins and an asset-heavy business model that requires substantial capital investment to generate modest returns.
Average Return on Capital Employed (ROCE) of 7.80% similarly underscores the company’s struggle to generate adequate returns from its total capital base. The latest half-yearly ROCE of 3.34% represents the lowest recorded level, highlighting deteriorating capital productivity. With an average EBIT to interest coverage ratio of 1.69 times, the company maintains only marginal breathing room above its debt servicing obligations, leaving little cushion for operational volatility.
The balance sheet reveals mounting leverage concerns. Long-term debt increased to ₹51.19 crores as of March 2025 from ₹45.30 crores the previous year, whilst the debt-to-equity ratio climbed to concerning levels. The debt-to-EBITDA ratio of 3.55 times indicates that the company would require over three and a half years of current EBITDA generation to repay its debt obligations, assuming no additional capital expconcludeiture or working capital requirements—an unrealistic scenario for a capital-intensive manufacturing business.
Capital Efficiency Warning
Critical Concern: ROE of 4.37% and ROCE of 7.80% fall well below indusattempt standards, indicating poor capital productivity. The company’s ability to generate acceptable returns from invested capital remains severely constrained, raising questions about the sustainability of its business model at current operational scales.
The Debt Burden: Interest Costs Eroding Profitability
Interest expenses represent a significant drag on Lokesh Machines’ profitability trajectory. In Q3 FY26, interest costs of ₹4.75 crores consumed nearly 50% of the company’s operating profit of ₹9.53 crores, leaving limited resources for depreciation coverage and bottom-line generation. On a nine-month basis for FY26, interest expenses reached ₹14.16 crores, growing 23.13% compared to the corresponding period, outpacing revenue growth and indicating deteriorating financial leverage.
The company’s operating profit to interest coverage ratio improved to 2.01 times in Q3 FY26, representing the highest quarterly level and providing some comfort regarding debt servicing capability. However, this improvement stems more from stabilising operating profits rather than declining interest burdens. With resolveed assets increasing to ₹199.76 crores as of March 2025 from ₹167.01 crores the previous year, the company continues to invest heavily in capacity expansion, necessitating ongoing debt financing and perpetuating the interest cost burden.
The net debt to equity ratio of 0.67 times indicates moderate leverage by manufacturing indusattempt standards, yet when combined with weak return metrics, this leverage amplifies shareholder risk without commensurate return generation. The company’s cash generation from operations of ₹20.00 crores in FY25, whilst positive, proved insufficient to fund investing activities of ₹37.00 crores, necessitating additional financing of ₹16.00 crores and perpetuating the cycle of debt accumulation.
Indusattempt Context: Manufacturing Sector Headwinds
Lokesh Machines operates in the industrial manufacturing sector, serving diverse conclude-markets including automotive, aerospace, defence, and railways through its specialised machine tools and auto components. The company’s product portfolio focapplys on finish cam and crank boring, finish barrel boring, and finish joint faces milling machines—niche segments requiring technical expertise but facing cyclical demand patterns tied to capital expconcludeiture cycles in conclude-applyr industries.
The broader industrial manufacturing sector has experienced mixed fortunes, with the sector delivering a one-year return of -6.46%. Lokesh Machines significantly underperformed this benchmark, posting a one-year return of -26.62%, representing an underperformance of 20.16 percentage points. This relative weakness suggests company-specific challenges beyond sector-wide headwinds, potentially related to competitive positioning, customer concentration, or execution issues.
The company’s order book dynamics and revenue visibility remain unclear from available financial disclosures, creating uncertainty regarding near-term revenue trajectory. The sequential revenue stabilisation in recent quarters provides limited comfort, yet the year-on-year declines and nine-month contraction indicate structural demand challenges that may persist. Without significant order book replenishment or new customer acquisitions, sustaining current revenue levels may prove challenging.
Competitive Positioning Concerns
Lokesh Machines’ 20.16 percentage point underperformance versus the industrial manufacturing sector over the past year signals potential market share losses or customer-specific issues. The company’s niche focus on specialised machine tools provides differentiation but may limit addressable market size and growth opportunities, particularly during periods of subdued capital expconcludeiture by conclude-customers.
Peer Comparison: Valuation Discount Reflects Fundamental Weakness
Comparing Lokesh Machines against industrial manufacturing peers reveals a company trading at a significant valuation discount, reflecting its weaker fundamental profile. Whilst the company’s P/E ratio remains unavailable due to recent loss-creating periods, its price-to-book ratio of 1.57 times appears reasonable but must be contextualised against its weak return on equity of 4.37%.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| Lokesh Machines | NA (Loss Making) | 1.57x | 4.37% | 0.67 | NA |
| Hercules Investment | 53.62x | 0.49x | 3.78% | -0.02 | NA |
| Stovec Industries | 48.35x | 3.07x | 12.02% | -0.26 | NA |
| Bemco Hydraulics | 25.83x | 5.06x | 13.55% | 0.10 | 0.11% |
| United Drilling | 24.95x | 1.41x | 6.27% | 0.11 | 0.96% |
| Fabtech Technologies | 29.67x | 3.82x | 12.93% | -0.08 | 0.69% |
Lokesh Machines’ ROE of 4.37% trails the peer group average of approximately 10%, justifying its lower valuation multiple. Bemco Hydraulics and Fabtech Technologies, commanding P/BV ratios above 3.80 times, deliver ROE exceeding 12%, demonstrating the premium markets assign to capital efficiency. Lokesh Machines’ combination of weak returns and moderate leverage (debt-to-equity of 0.67 versus predominantly debt-free peers) positions it unfavourably within the competitive set.
The absence of dividconclude payments from Lokesh Machines, contrasting with modest yields offered by some peers, further diminishes its appeal to income-seeking investors. With a market capitalisation of ₹359.00 crores, the company ranks fifth amongst its peer group, reflecting its micro-cap status and associated liquidity constraints that may limit institutional investor interest.
Valuation Analysis: Attractive Enattempt Point or Value Trap?
Lokesh Machines’ current valuation metrics present a conundrum—superficially attractive multiples mquestioning fundamental quality concerns. The stock trades at a P/BV ratio of 1.57 times against a book value per share of ₹107.95, implying a fair value in the range of ₹170-180 based purely on asset backing. However, this mechanical valuation approach ignores the company’s inability to generate acceptable returns on those assets, with ROE of 4.37% falling far below the cost of equity capital.
The company’s EV/EBITDA multiple of 19.04 times appears elevated for a business delivering single-digit ROCE, suggesting the market may be pricing in an optimistic turnaround scenario. With an enterprise value to sales ratio of 2.67 times and EV to capital employed of 1.34 times, the valuation implies expectations for significant margin expansion and capital efficiency improvements—outcomes that appear challenging given recent trconcludes.
The proprietary Mojo Score of 34 out of 100 categorises the stock as “SELL,” reflecting the algorithm’s assessment that fundamental weaknesses outweigh valuation attractions. The valuation grade of “ATTRACTIVE” must be interpreted cautiously—whilst the stock trades below historical peaks (33.16% below its 52-week high of ₹264.75), this decline reflects deteriorating fundamentals rather than temporary market pessimism creating opportunity.
P/E Ratio (TTM)
NA
Loss Making
Price to Book
1.57x
Book Value: ₹107.95
EV/EBITDA
19.04x
Elevated for returns profile
Mojo Score
34/100
SELL Category
Shareholding Pattern: Stable Promoter Base, Zero Institutional Interest
Lokesh Machines’ shareholding structure reveals a promoter-dominated capital base with conspicuous absence of institutional investors. Promoter holding stood at 53.60% as of December 2025, unmodifyd from September 2025 but representing a gradual increase from 51.75% in December 2024. This sequential accumulation of 1.85 percentage points over four quarters demonstrates promoter confidence, though the pace remains modest.
| Category | Dec’25 | Sep’25 | Jun’25 | Mar’25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 53.60% | 53.60% | 53.16% | 53.16% | Flat |
| FII | 0.00% | 0.00% | 0.00% | 0.00% | — |
| Mutual Funds | 0.00% | 0.00% | 0.00% | 0.00% | — |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% | — |
| Other DII | 0.00% | 0.00% | 0.00% | 0.00% | — |
| Non-Institutional | 46.40% | 46.40% | 46.84% | 46.84% | Flat |
The complete absence of Foreign Institutional Investors (FII), Mutual Funds, Insurance Companies, and other Domestic Institutional Investors (DII) signals a concerning lack of institutional validation. Zero institutional holding in a listed company typically reflects concerns about liquidity, corporate governance, growth visibility, or fundamental quality—factors that sophisticated investors weigh heavily in allocation decisions. For Lokesh Machines, the weak return metrics and modest scale likely deter institutional interest.
The non-institutional holding of 46.40%, comprising retail investors and non-institutional entities, provides limited stability during periods of market stress. Without institutional anchor investors, the stock remains susceptible to volatility and may struggle to attract research coverage from brokerage hoapplys, perpetuating a cycle of limited visibility and constrained valuation multiples.
Stock Performance: Severe Underperformance Across Timeframes
Lokesh Machines’ stock price performance presents a troubling picture of sustained underperformance across most relevant timeframes. Trading at ₹176.95 as of February 13, 2026, the stock has delivered a one-year return of -26.62%, dramatically underperforming the Sensex return of 8.52% by 35.14 percentage points. This negative alpha indicates company-specific challenges beyond broader market relocatements.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +3.39% | -1.14% | +4.53% |
| 1 Month | -1.69% | -1.20% | -0.49% |
| 3 Month | -2.18% | -2.19% | +0.01% |
| 6 Month | -12.90% | +2.59% | -15.49% |
| YTD | +8.73% | -3.04% | +11.77% |
| 1 Year | -26.62% | +8.52% | -35.14% |
| 2 Years | -50.74% | +15.47% | -66.21% |
| 3 Years | +55.70% | +36.73% | +18.97% |
| 5 Years | +369.99% | +60.30% | +309.69% |
The two-year performance proves even more distressing, with the stock declining 50.74% whilst the Sensex gained 15.47%, resulting in negative alpha of 66.21 percentage points. This sustained underperformance coincides with the company’s operational challenges and deteriorating financial metrics, validating the market’s reassessment of the company’s fundamental value.
Longer-term performance metrics reveal a more nuanced picture. The three-year return of 55.70% and five-year return of 369.99% demonstrate that the stock delivered exceptional gains during earlier periods, likely reflecting the company’s growth phase and margin expansion. However, the recent two-year collapse suggests those gains represented excessive optimism that has since been corrected as operational realities emerged.
From a technical perspective, the stock currently trades in a “mildly bearish” trconclude, having modifyd from “bearish” on January 28, 2026. Trading below all key shifting averages—5-day (₹179.29), 20-day (₹171.66), 50-day (₹169.75), 100-day (₹176.61), and 200-day (₹184.20)—the stock lacks technical support. With a beta of 1.50, the stock exhibits 50% higher volatility than the market, amplifying both gains and losses.
Investment Thesis: Quality Concerns Overshadow Valuation Appeal
Lokesh Machines’ investment case rests precariously on the tension between superficially attractive valuation metrics and deeply concerning fundamental quality indicators. The proprietary Mojo assessment framework reveals this dichotomy clearly across its four key parameters.
Valuation (Attractive): The stock trades at a P/BV of 1.57 times and sits 33.16% below its 52-week high, suggesting valuation support. However, this “attractiveness” proves misleading when juxtaposed against the company’s inability to generate acceptable returns on capital.
Quality Grade (Below Average): The company’s quality assessment of “Below Average” reflects weak average ROCE of 7.80%, anaemic ROE of 4.37%, and concerning debt metrics including EBIT-to-interest coverage of only 1.69 times. Whilst the company demonstrates healthy long-term sales growth of 10.72% and maintains zero promoter pledging, these positives prove insufficient to offset capital efficiency concerns.
Financial Trconclude (Positive): The short-term financial trconclude classification of “Positive” provides limited comfort, driven by quarterly profitability stabilisation and improved operating profit to interest coverage. However, this positive assessment must be tempered by recognition of elevated interest costs, deteriorating ROCE, and revenue contraction on a nine-month basis.
Technical Trconclude (Mildly Bearish): The stock’s technical positioning remains weak, trading below all shifting averages and exhibiting a mildly bearish trconclude. With high volatility (beta of 1.50) and sustained underperformance, technical indicators provide no support for accumulation.
“A company generating 4.37% return on equity whilst trading at 1.57 times book value presents not an opportunity, but a value trap—superficial cheapness mquestioning structural unprofitability.”
Key Strengths & Risk Factors
Key Strengths ✓
- Operational Margin Resilience: Operating margins of 18.79% demonstrate pricing power and cost management capability despite revenue pressures
- Quarterly Profitability Stabilisation: Three consecutive quarters of positive net profit following December 2024 loss indicates operational recovery
- Niche Technical Expertise: Specialisation in finish boring and milling machines provides differentiation in industrial manufacturing
- Diverse End-Market Exposure: Serving automotive, aerospace, defence, and railways reduces customer concentration risk
- Zero Promoter Pledging: Absence of pledged shares eliminates governance concerns related to forced selling
- Long-Term Growth Track Record: Five-year sales CAGR of 10.72% demonstrates historical growth capability
- Established Operations: Four decades of operating history since 1985 provides institutional knowledge and customer relationships
Key Concerns ⚠
- Severely Weak ROE: Average return on equity of 4.37% falls dramatically below acceptable thresholds, indicating poor shareholder value creation
- Inadequate ROCE: Return on capital employed of 7.80% suggests capital-intensive business model generates insufficient returns
- Revenue Contraction: Year-on-year sales decline of 2.05% and nine-month contraction indicate demand challenges
- Elevated Interest Burden: Interest costs consuming 50% of operating profit severely constrain bottom-line generation
- Mounting Leverage: Debt-to-EBITDA of 3.55 times and increasing long-term debt raise financial risk concerns
- Zero Institutional Holding: Complete absence of FII, mutual fund, and insurance holdings signals lack of sophisticated investor validation
- Micro-Cap Liquidity: Market capitalisation of ₹359.00 crores limits institutional investor interest and creates liquidity constraints
- Severe Stock Underperformance: One-year return of -26.62% and two-year return of -50.74% reflect sustained market pessimism
- High Volatility: Beta of 1.50 amplifies market relocatements, increasing risk for investors
- No Dividconclude Income: Absence of dividconclude payments eliminates income component of total return
Outsee: What to Watch
Positive Catalysts
- Order Book Replenishment: Significant new order wins from defence, aerospace, or automotive sectors could reverse revenue trajectory
- Margin Expansion: Further operating leverage from resolveed cost absorption if revenue stabilises could improve profitability
- Debt Reduction: Aggressive debt paydown applying operational cash flows would reduce interest burden and improve returns
- Capacity Utilisation Improvement: Better absorption of recently expanded resolveed assets could enhance capital efficiency metrics
- Product Mix Enhancement: Shift towards higher-margin specialised equipment could improve PAT margins beyond current 1.24%
Red Flags
- Continued Revenue Decline: Further QoQ or YoY sales contraction would signal structural demand issues
- Margin Compression: Operating margin decline below 15% would indicate pricing pressure or cost inflation
- Interest Cost Escalation: Rising interest expenses despite stable debt would signal refinancing at higher rates
- Working Capital Deterioration: Increasing debtor days or inventory levels would strain cash generation
- Return to Losses: Quarterly net profit turning negative would validate concerns about business model sustainability
Forward Outsee
Lokesh Machines stands at a critical juncture, having stabilised quarterly profitability but facing persistent challenges around revenue growth, capital efficiency, and financial leverage. The company’s ability to generate acceptable returns on invested capital remains the central question determining investment merit. Without substantial improvement in ROCE and ROE—requiring either significant margin expansion or dramatic revenue growth—the company’s valuation multiples appear unlikely to re-rate meaningfully.
The immediate quarters ahead will prove crucial in determining whether recent profitability stabilisation represents genuine operational turnaround or merely cyclical respite. Investors should monitor order book trconcludes, capacity utilisation metrics, and most critically, whether the company can translate operational efficiency into bottom-line growth whilst managing its debt burden. The absence of institutional investors and sustained stock underperformance suggest the market remains sceptical about the company’s ability to execute such a turnaround.
The Verdict: Value Trap Masquerading as Opportunity
SELL
Score: 34/100
For Fresh Investors: Avoid initiating positions. Whilst valuation metrics appear superficially attractive, the combination of weak return on equity (4.37%), inadequate return on capital employed (7.80%), elevated leverage, and sustained revenue pressures creates a classic value trap scenario. The 50.74% decline over two years reflects fundamental deterioration rather than temporary market pessimism.
For Existing Holders: Consider reducing positions on any technical bounces. The company’s structural challenges around capital efficiency and profitability generation appear unlikely to resolve in the near term. With zero institutional validation, high volatility, and persistent negative alpha, the opportunity cost of remaining invested appears substantial. Use any strength towards ₹185-190 levels to exit.
Fair Value Estimate: ₹145-155 (18% downside from current levels), reflecting 1.35x P/BV multiple justified by sub-par ROE and elevated debt burden
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 creating any investment decisions. Past performance does not guarantee future results. Investing in equities involves substantial risk of loss.
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