At a Glance

Lloyds Engineering Works Ltd is on a rollercoaster – Q1 FY26 PAT dropped 17% YoY to ₹17.6 Cr while sales declined 28% to ₹174 Cr. Despite this, the stock holds strong at ₹73.2, because retail loves a “defence order” buzzword. With a P/E of 106x, this stock is priced as if it’s building the next aircraft carrier, not just fabricating components. Promoter holding fell to 49.3%, adding a bit of spice to the drama.

Introduction

Once a steel equipment maker struggling with legacy issues, Lloyds Engineering has rebranded itself as a niche player in defence, naval propulsion, and high-tech fabrication. The transformation story has fueled a 5-year profit CAGR of 109%, but investors are now asking – is the hype justified or is this just another overvalued microcap with a shiny order book?

Business Model (WTF Do They Even Do?)

Lloyds designs and manufactures heavy equipment & turnkey systems for hydrocarbons, oil & gas, power, nuclear, and naval projects. Recently, it entered defence naval propulsion systems with Italian major Fincantieri. Its revenue mix is:

• Hydrocarbon & Steel Plant Equipment – Old bread-and-butter.
• Defence & Naval Orders – New growth driver.
• Turnkey Projects – High-margin, high-risk contracts.

Roast: Great at getting orders, not always great at executing them on time without margin erosion.

Financials Overview

• Revenue: ₹174 Cr (↓29% YoY)
• EBITDA: ₹24 Cr (margin 14%)
• PAT: ₹17.6 Cr (↓17% YoY)
• EPS: ₹0.12

Commentary: Margins are steady, but order execution timing killed revenue growth this quarter.

Valuation

• CMP: ₹73.2
• P/E: 106x (sky-high)
• Book Value: ₹4.38 (P/B 16.7x)
• ROE: 18.9%
• ROCE: 23.2%

Fair Value Range: ₹45 – ₹60. The current valuation is priced for perfection.

What’s Cooking – News, Triggers, Drama

• Rights Issue: ₹1,050 Cr rights issue at ₹32 to fund expansion.
• Acquisitions: 76% stake in Metalfab Hightech and 11% in TIPL to boost fabrication capabilities.
• Defence Orders: Partnership with Fincantieri for indigenous naval propulsion.
• Orders: Recent ₹20.7 Cr contract from Cochin Shipyard and a quirky ₹15.3 Cr order for a cricket museum at Wankhede Stadium.

Balance Sheet

Remarks: Low debt but high equity dilution risk due to frequent rights issues.

Cash Flow – Sab Number Game Hai

Remarks: Operating cash finally turned positive in FY25, but investing cash outflow continues due to acquisitions.

Ratios – Sexy or Stressy?

Remarks: Strong returns but valuation is stretched beyond logic.

P&L Breakdown – Show Me the Money

Remarks: Tremendous growth, but Q1 FY26 is a speed bump.

Peer Comparison

Remarks: Lloyds trades at a higher P/E than peers with much larger scale – risky.

Miscellaneous – Shareholding, Promoters

• Promoter Holding: 49.3% (fell 7% QoQ)
• FIIs: 2.2%
• Public: 48.3%

Comment: Falling promoter stake raises eyebrows.

EduInvesting Verdict™

Past Performance

Lloyds has gone from near-obscurity to a ₹10,000 Cr market cap darling in 3 years. Its defence pivot is promising, but investor euphoria is running ahead of fundamentals.

SWOT Analysis

• Strengths: High ROE/ROCE, strong order book, defence entry.
• Weaknesses: Overvaluation, promoter stake dilution, execution risk.
• Opportunities: Defence sector growth, Make-in-India push.
• Threats: Order delays, rising competition, macro slowdown.

Final Word

Lloyds Engineering is like that student who topped the last exam and now thinks they’re IIT material – the market is rewarding it for its transformation, but one bad quarter could trigger a harsh reality check. For now, it’s a high-beta bet on defence manufacturing with a price tag that assumes everything will go right.

Written by EduInvesting Team | 29 July 2025
SEO Tags: Lloyds Engineering, Defence Manufacturing, Q1 FY26 Results