Q4FY12 Estimates for PI Industries, Jubilant Industries and LG Balakrishnan Bros -- pdf file
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mahesh
Apr 17, 2012, 3:38:48 AM4/17/12
to "GLOBAL SPECULATORS"
LG Balakrishnan & Bros Ltd has informed BSE that a Meeting of the
Board of Directors of the Company will be held on April 28, 2012 to
consider the audited financial results for the quarter / year ended
March 31, 2012 and to recommend the payment of dividend for the
financial year 2011-2012
On Apr 2, 10:32 am, "mahesh i. shah" <equityanalystinves...@gmail.com>
wrote:
> Q4FY12Estimate.pdf
> 322KViewDownload
Board of Directors of the Company will be held on April 28, 2012 to
consider the audited financial results for the quarter / year ended
March 31, 2012 and to recommend the payment of dividend for the
financial year 2011-2012
On Apr 2, 10:32 am, "mahesh i. shah" <equityanalystinves...@gmail.com>
wrote:
> 322KViewDownload
mahesh
May 7, 2012, 1:38:51 AM5/7/12
to "GLOBAL SPECULATORS"
Link to 5-page Detailed Q4FY12 Update on LGB -- http://www.scribd.com/doc/92650983
-------------------------------------------------
LG Balakrishnan & Bros Ltd. [ NSE : LGBBROSLTD ; BSE : 500250 ]
announced its Q4FY12 (12'Months'FY12) results on 28th April, 2012.
Topline performance for the quarter as well as fiscal was inline with
our estimates with disappointment on margins front which came quite
below our estimates being marred by heavy power shortages faced in
entire state of Tamil Nadu in the quarter. Post results, we maintain
our view that the company is 'Grossly Undervalued' and is a Rare
Investment Opportunity wherein all the required ingredients like --
Reasonable Operating Scale ( INR 912 cr. ),
Market Leadership Position in Operating Segment ( 60 % Marketshare ),
Track-Record of Outperforming Industry as well as Peers in terms of
Growth Rate,
Concern towards Minority Shareholders' Wealth Creation ( which is
evident from higher dividend payout in FY12 at 110 % despite
marginally lower PAT )
-- are present and still the company is available at sharp discount
to its smaller size peers.
Presenting below the highlights of Q4FY12 as well as fiscal FY12
results as also our detailed analysis post the results :
(1) Consolidated Revenue for FY12 stood at INR 912.68 cr. which
translates to a healthy YoY growth of 27.69 % over FY11. For
Q4FY12, Consolidated Revenue stood at INR 227.69 cr. which translates
to a YoY growth of 20.7 % but a marginal QoQ decline of 2.95 %.
Quarterly gyrations are normal in the industry with Q2 and Q3 normally
the best quarters.
(2) Consolidated EBITDA for FY12 stood at INR 103.6 cr. which
translates to a YoY growth of 19.14 % over FY11. For Q4FY12,
Consolidated EBITDA stood at INR 18.97 cr. which translates to a YoY
decline of 8 % and a QoQ decline of 28.54 %. The sharp decline
in EBITDA is attributable to severe power shortages faced by entire
state of Tamil Nadu in Q4FY12 because of which company had to make
arrangements for alternative power sources to keep its plants running
so as to avoid any kind of disruptions of supply for its OEM clients.
This resulted in sharp rise in production costs which resulted to
decline in overall EBITDA. With power situation already improving
since the beginning of Q1FY13 and significant improvement expected
post June 2012 on commissioning of major power plants, EBITDA margins
of the company are expected to be back to normal levels to some extent
in Q1FY13 and completely by Q2FY13.
(3) Consolidated PBT for FY12 stood at INR 58.91 cr. which
translates to a YoY growth of 22.47 % over FY11.
(4) Tax Expenditure for FY12 stood at INR 14.68 cr. which is a
whooping 711 % increase over last fiscal, FY11. Although last fiscal
included a tax credit worth INR 5.33 cr., but, even excluding such
credit, the tax expenditure for current fiscal, FY12, on a like-to-
like basis shows an increase of 105.6 % over previous fiscal. The
higher tax expenditure is largely on account of company's major plants
approaching end of full tax exemption period and going forward these
plants are likely to enjoy partial tax exemption for coming 5 fiscals.
(5) Because of higher tax expenditure incurred, PAT for fiscal FY12
stood at INR 44.22 cr. which is a marginal 4.47 % decline over
previous fiscal.
(6) Inspite of lower PAT, company has increased its dividend payout to
110 % i.e. Rs. 11 per share which signifies continued commitment of
management of the company towards minority shareholders' wealth
creation.
(7) Now, to concentrate on segmentwise performance of the company, the
core operating segment of the company viz., Chains/Sprockets which is
reported under 'Transmission' Segment, recorded a robust 35.54 %
growth in revenues for FY12 to stand at INR 625.84 cr.. This growth
is to be seen in the backdrop of moderation in growth rate faced by
main consuming segment i.e. Two Wheeler industry which recorded a
14.2 % growth in sales for FY12. It is worthwhile to also take into
account here the growth rate achieved by Automotive Chains segment of
LGB's only formidable peer viz., TIDC India (a division of Tube
Investment of India Ltd.) for FY12 wherein it reported only 16 %
growth in revenues to stand at ~INR 300 cr..
(8) LGB continues to consistently outperform the industry as well as
its peers in terms of revenue growth which augurs very well for the
cash generation of the company for FY13 and FY14 when the one-off
margin-hit which has occurred in FY12 due to significant power
shortages in its operating state gets corrected. This outperformance
also depicts the obvious fact that LGB is gaining significant ground
in terms of its already highest marketshare in its core operating
segment viz. Chains/Sprockets and such a high marketshare will itself
act as a significant entry barrier for its peers to penetrate deeply
into the market.
(9) Company's next significant operating segment viz., Metal Forming
(which covers its Fine Blanking Operations, Rolled Steel Products as
well as sales done by dedicated Unit for Bosch) turned out a stable
growth for FY12 in terms of revenues which stood at INR 157.86 cr.
which translates into a YoY growth of 7.94 %. However, the most
significant thing to take note of with regards to LGB's Metal Forming
segment is the fact that company has built a strong foundation for
its considerable scale ramp-up in the years to come by bagging
significant orders from Ashok Leyland, Daimler, Eaton and ZF,
deliveries of which are expected to start in FY13. Company has also
signed a LOI to acquire majority stake in a USA-based company engaged
in Precision Stamping which is expected to add significant
technological advantage to LGB's already strong and India's Largest
Fine Blanking operations as also open-up the vast US market for its
products.
(10) Metal Forming division is expected to see significant growth in
revenues starting 2HFY13 which is expected to boost company's cash
generation to a considerable extent in FY14.
(11) Company's last non-core operating segment viz., Dealership of
Tata Motors LCVs as also exclusive distributorship of Top1 Oil
Products' premium Lubricants in South India is reported under 'Others'
segment. This division turned out an impressive 20.8 % YoY growth in
revenues to INR 128.97 cr. in FY12 backed by addition of Top1 Oil
Products' distribution this fiscal as also some pre-budget buying of
LCVs turning in company's favour. However, this division is expected
to remain a non-core area of LGB which is continued just to improve
brand visibility of the company in the marketplace as also to fully
utilise the already strong ground distribution network that the
company enjoys.
View Post Q4FY12 (12'Months'FY12) Results :
Before going any further, it will be worthwhile to enumerate here
certain key facts that need to be noted in FY12 (Q4FY12) results which
are otherwise not apparently visible but are obvious on detailed
interpretation of the reported results :
The reason why LGB enjoys extremely healthy relationship with each of
the Indian Two Wheeler OEMs and therefore enjoys more than 65 %
marketshare with OEMs is apparent on detailed interpretaion of the
just declared results. Q4FY12 marked one of the worst quarters in
company's history as far operating work environment is concerned
because of the severe power shortages faced by its resident state
Tamil Nadu. Majority of its manufacturing plants located in the state
faced a power-cut for upto 10 hours a day for most of the Q4FY12.
Still, company made alternative arrangements of power to keep the
plants running so that the supply to its clients, which include almost
all Indian Two Wheeler OEMs, doesn't get affected even a single bit.
If we contrast this with the strategy adopted by its only formidable
peer in the segment viz., TIDC (a division of Tube Investment of
India) then its interesting to note that for most of the 2HFY12,
TIDC's Automotive Chain Units worked at 98-100 % capacity utilisation
and, its only when its existing Units reached almost peak utilisation
levels, the plans for next capacity increases were drawn thereby fresh
orders of their existing clients remaining unserved. TIDC's new
capacities are likely to be operational only in 2HFY13 and therefore,
in 1HFY13 again, TIDC will loose on the opportunity to serve fresh
orders of its OEM clients.
From above, its evident that because of the uncertainty in likely
growth of main consuming segment viz. Two Wheelers, whereas TIDC
decided to play safe by first letting its existing capacities run out
thereby loosing on the opportunity to serve any fresh orders till
2HFY13 ; on the other hand, LGB decided to expand in FY11 ahead of
expected uncertain market demand and even served the demand in
extremely tough work environment without any interruption thereby
giving utmost respect to its OEM clients' manufacturing plans. OEM
clients prefer to work with such vendors which ensure timely supply
irrespective of operating conditions and this is the reason why LGB
enjoys a critical vendor status with almost all Indian Two Wheeler
OEMs and therefore enjoys more than 65 % marketshare in their Chains/
Sprocket supplies.
Second most interesting aspect to note from the just declared results
is the consistent outperformance of LGB vis-a-vis industry as well
as its only formidable peer, TIDC. It will be interesting here to
look at CAGR of LGB's Chain/Sprocket sales revenue and pitch
it against Industry i.e. Two Wheeler CAGR as also against
Chain/Sprocket sales revenue CAGR of TIDC. Since CAGR data for
TIDC is available only for 2 years, so, we will consider here only 2
years' CAGR of LGB, Industry and TIDC. It is worthwhile to note here
that LGB's growth is coming on a higher scale which is almost double
than that of TIDC.
LGB's Chain/Sprockets Sales
2 Years' CAGR
TIDC India Chain/Sprockets Sales 2 Years' CAGR
Two Wheeler Industry (OEM)
2 Years' CAGR
33.87 %
25.65 %
19.74 %
Two important things need to be noted in above :
(a) Scale of LGB's Chain/Sprocket sales is more than double at INR
625.84 cr. than that of TIDC at INR 300 cr.
(b) TIDC was constrained by capacity in FY12 wherein, for most of
the 2HFY12, its plants operated at 98-100 % capacity utilisation.
It has drawn up plans for almost 50 % increase in its existing
capacities of Automotive Chains but such additional capacities will
get operational only in 2HFY13, so, even for FY13, TIDC is
expected to remain a significant underperformer vis-a-vis LGB.
We think it proper to mention here the Nationwide ground Auto Spare
Dealers / Service Centers / Workshops feedback that we have
collected for Rolon (LGB's brand) and its competing brands. The
feedback for Rolon has been very positive with no dealer denying
the fact that Rolon enjoys more than 50 % marketshare in
replacement market. The strength of the brand can be gauged by
citing an example of two of the biggest spares dealer-checks of J&K
(North India) who claim that Rolon enjoys more than 70 % marketshare
in aftermarket there. To have such a strong presence in remote North
India too, speaks very well of the brand and its undefeatable position
in the market.
To continue with the ground feedback, aftermarket in India is now
maturing with lots of company workshops opening up who prefer standard
OEM (i.e. company) chains/sprockets only as replacement. This means an
ascending consumption trend towards OE Spares (i.e. replacement market
catered by OEM) where again LGB is a market leader. There is a
presence of lots of chinese and unorganised products too but their use
is limited to hardly 6-7 % of the total consumption as their quality
is far inferior and their use actually creates many other vehicle
issues. Also, consumers are preferring replacing the chain/sprocket
instead of repairing it as the repair-work only extends the life by
350-400 kms. after which again the repair-work needs to be done before
finally replacing it after 3-5 repair sessions.
Now, to continue with our discussion on observatory aspects -- another
interesting aspect which needs to be observed is, the LGB management's
thinking ahead of time, which is not only evident from the steps it
has taken over last 3 decades to maintain and grow its leadership
position in Chains/Sprocket business, but, also to invest ahead of
time in Fine Blanking operations which is now catching up fast and is
emerging as the next growth area in Auto Ancillary segment. Already,
LGB has built a strong foundation in this segment by setting-up
India's largest Fine Blanking Infrastructure and now, to acquire
technological edge as also to tap the high-potential Western Markets,
company has recently signed a LOI to acquire a precision stamping
company in USA. Peers are only now waking up to this space as is
evident from the recent management commentary of TIDC India wherein
it plans to invest heavily in its Fine Blanking Operations going
forward as they see tremendous potential in this segment because of
many four wheeler OEMs setting up shop here.
The fourth and most crucial point to observe in just declared results
of LGB is the declaration of 110 % dividend i.e. Rs. 11 per
share inspite of marginally lower PAT of FY12. Higher dividend payout
highlights two aspects :
– first, Management's Concern towards rewarding its shareholders
thereby giving priority to Minority Shareholders' Wealth Creation
aspect.
-- second, Management's Confidence of continued internal Cash
Generation as otherwise it would have conserved resources for its
core business.
To conclude, continuing with our first IC Report on LG Balakrishnan &
Bros. Ltd. (LGB) dated 28th March 2012, we feel nothing has changed
except the fact that because of dismal profitability in Q4FY12 due to
one-off tough operating conditions of severe power-cuts in its
operating state, the company's share price has corrected ~8 % from our
IC rate of INR 310. Even at the IC rate of INR 310, no positives were
priced-in so we see no reason for the recent correction on the back of
one-off dismal Q4FY12 performance on profitability front.
One crucial thing to note here is the fact that, at the current mcap
of INR 224 cr., company is trading at just 2.1 times its FY12
reported EBITDA of INR 103.6 cr.. which is very low for a company
having a scale of operations at INR 912 cr. and one of the lowest in
entire Auto Ancillary basket with similar scale. Such low valuations
are prevalent inspite of the fact that company has good prospects of
growth atleast for next 3 years based on only Replacement Segment
Demand and such low valuations are just an anomaly because of low IR-
initiatives of the company which can't remain for long. We maintain
our view that stock has to correct to atleast INR 440 levels
sooner rather than later to reflect a reasonable valuation as
compared to its peers.
On Apr 17, 12:38 pm, mahesh <equityanalystinves...@gmail.com> wrote:
> LGBalakrishnan& Bros Ltd has informed BSE that a Meeting of the
>
> - Show quoted text -
-------------------------------------------------
LG Balakrishnan & Bros Ltd. [ NSE : LGBBROSLTD ; BSE : 500250 ]
announced its Q4FY12 (12'Months'FY12) results on 28th April, 2012.
Topline performance for the quarter as well as fiscal was inline with
our estimates with disappointment on margins front which came quite
below our estimates being marred by heavy power shortages faced in
entire state of Tamil Nadu in the quarter. Post results, we maintain
our view that the company is 'Grossly Undervalued' and is a Rare
Investment Opportunity wherein all the required ingredients like --
Reasonable Operating Scale ( INR 912 cr. ),
Market Leadership Position in Operating Segment ( 60 % Marketshare ),
Track-Record of Outperforming Industry as well as Peers in terms of
Growth Rate,
Concern towards Minority Shareholders' Wealth Creation ( which is
evident from higher dividend payout in FY12 at 110 % despite
marginally lower PAT )
-- are present and still the company is available at sharp discount
to its smaller size peers.
Presenting below the highlights of Q4FY12 as well as fiscal FY12
results as also our detailed analysis post the results :
(1) Consolidated Revenue for FY12 stood at INR 912.68 cr. which
translates to a healthy YoY growth of 27.69 % over FY11. For
Q4FY12, Consolidated Revenue stood at INR 227.69 cr. which translates
to a YoY growth of 20.7 % but a marginal QoQ decline of 2.95 %.
Quarterly gyrations are normal in the industry with Q2 and Q3 normally
the best quarters.
(2) Consolidated EBITDA for FY12 stood at INR 103.6 cr. which
translates to a YoY growth of 19.14 % over FY11. For Q4FY12,
Consolidated EBITDA stood at INR 18.97 cr. which translates to a YoY
decline of 8 % and a QoQ decline of 28.54 %. The sharp decline
in EBITDA is attributable to severe power shortages faced by entire
state of Tamil Nadu in Q4FY12 because of which company had to make
arrangements for alternative power sources to keep its plants running
so as to avoid any kind of disruptions of supply for its OEM clients.
This resulted in sharp rise in production costs which resulted to
decline in overall EBITDA. With power situation already improving
since the beginning of Q1FY13 and significant improvement expected
post June 2012 on commissioning of major power plants, EBITDA margins
of the company are expected to be back to normal levels to some extent
in Q1FY13 and completely by Q2FY13.
(3) Consolidated PBT for FY12 stood at INR 58.91 cr. which
translates to a YoY growth of 22.47 % over FY11.
(4) Tax Expenditure for FY12 stood at INR 14.68 cr. which is a
whooping 711 % increase over last fiscal, FY11. Although last fiscal
included a tax credit worth INR 5.33 cr., but, even excluding such
credit, the tax expenditure for current fiscal, FY12, on a like-to-
like basis shows an increase of 105.6 % over previous fiscal. The
higher tax expenditure is largely on account of company's major plants
approaching end of full tax exemption period and going forward these
plants are likely to enjoy partial tax exemption for coming 5 fiscals.
(5) Because of higher tax expenditure incurred, PAT for fiscal FY12
stood at INR 44.22 cr. which is a marginal 4.47 % decline over
previous fiscal.
(6) Inspite of lower PAT, company has increased its dividend payout to
110 % i.e. Rs. 11 per share which signifies continued commitment of
management of the company towards minority shareholders' wealth
creation.
(7) Now, to concentrate on segmentwise performance of the company, the
core operating segment of the company viz., Chains/Sprockets which is
reported under 'Transmission' Segment, recorded a robust 35.54 %
growth in revenues for FY12 to stand at INR 625.84 cr.. This growth
is to be seen in the backdrop of moderation in growth rate faced by
main consuming segment i.e. Two Wheeler industry which recorded a
14.2 % growth in sales for FY12. It is worthwhile to also take into
account here the growth rate achieved by Automotive Chains segment of
LGB's only formidable peer viz., TIDC India (a division of Tube
Investment of India Ltd.) for FY12 wherein it reported only 16 %
growth in revenues to stand at ~INR 300 cr..
(8) LGB continues to consistently outperform the industry as well as
its peers in terms of revenue growth which augurs very well for the
cash generation of the company for FY13 and FY14 when the one-off
margin-hit which has occurred in FY12 due to significant power
shortages in its operating state gets corrected. This outperformance
also depicts the obvious fact that LGB is gaining significant ground
in terms of its already highest marketshare in its core operating
segment viz. Chains/Sprockets and such a high marketshare will itself
act as a significant entry barrier for its peers to penetrate deeply
into the market.
(9) Company's next significant operating segment viz., Metal Forming
(which covers its Fine Blanking Operations, Rolled Steel Products as
well as sales done by dedicated Unit for Bosch) turned out a stable
growth for FY12 in terms of revenues which stood at INR 157.86 cr.
which translates into a YoY growth of 7.94 %. However, the most
significant thing to take note of with regards to LGB's Metal Forming
segment is the fact that company has built a strong foundation for
its considerable scale ramp-up in the years to come by bagging
significant orders from Ashok Leyland, Daimler, Eaton and ZF,
deliveries of which are expected to start in FY13. Company has also
signed a LOI to acquire majority stake in a USA-based company engaged
in Precision Stamping which is expected to add significant
technological advantage to LGB's already strong and India's Largest
Fine Blanking operations as also open-up the vast US market for its
products.
(10) Metal Forming division is expected to see significant growth in
revenues starting 2HFY13 which is expected to boost company's cash
generation to a considerable extent in FY14.
(11) Company's last non-core operating segment viz., Dealership of
Tata Motors LCVs as also exclusive distributorship of Top1 Oil
Products' premium Lubricants in South India is reported under 'Others'
segment. This division turned out an impressive 20.8 % YoY growth in
revenues to INR 128.97 cr. in FY12 backed by addition of Top1 Oil
Products' distribution this fiscal as also some pre-budget buying of
LCVs turning in company's favour. However, this division is expected
to remain a non-core area of LGB which is continued just to improve
brand visibility of the company in the marketplace as also to fully
utilise the already strong ground distribution network that the
company enjoys.
View Post Q4FY12 (12'Months'FY12) Results :
Before going any further, it will be worthwhile to enumerate here
certain key facts that need to be noted in FY12 (Q4FY12) results which
are otherwise not apparently visible but are obvious on detailed
interpretation of the reported results :
The reason why LGB enjoys extremely healthy relationship with each of
the Indian Two Wheeler OEMs and therefore enjoys more than 65 %
marketshare with OEMs is apparent on detailed interpretaion of the
just declared results. Q4FY12 marked one of the worst quarters in
company's history as far operating work environment is concerned
because of the severe power shortages faced by its resident state
Tamil Nadu. Majority of its manufacturing plants located in the state
faced a power-cut for upto 10 hours a day for most of the Q4FY12.
Still, company made alternative arrangements of power to keep the
plants running so that the supply to its clients, which include almost
all Indian Two Wheeler OEMs, doesn't get affected even a single bit.
If we contrast this with the strategy adopted by its only formidable
peer in the segment viz., TIDC (a division of Tube Investment of
India) then its interesting to note that for most of the 2HFY12,
TIDC's Automotive Chain Units worked at 98-100 % capacity utilisation
and, its only when its existing Units reached almost peak utilisation
levels, the plans for next capacity increases were drawn thereby fresh
orders of their existing clients remaining unserved. TIDC's new
capacities are likely to be operational only in 2HFY13 and therefore,
in 1HFY13 again, TIDC will loose on the opportunity to serve fresh
orders of its OEM clients.
From above, its evident that because of the uncertainty in likely
growth of main consuming segment viz. Two Wheelers, whereas TIDC
decided to play safe by first letting its existing capacities run out
thereby loosing on the opportunity to serve any fresh orders till
2HFY13 ; on the other hand, LGB decided to expand in FY11 ahead of
expected uncertain market demand and even served the demand in
extremely tough work environment without any interruption thereby
giving utmost respect to its OEM clients' manufacturing plans. OEM
clients prefer to work with such vendors which ensure timely supply
irrespective of operating conditions and this is the reason why LGB
enjoys a critical vendor status with almost all Indian Two Wheeler
OEMs and therefore enjoys more than 65 % marketshare in their Chains/
Sprocket supplies.
Second most interesting aspect to note from the just declared results
is the consistent outperformance of LGB vis-a-vis industry as well
as its only formidable peer, TIDC. It will be interesting here to
look at CAGR of LGB's Chain/Sprocket sales revenue and pitch
it against Industry i.e. Two Wheeler CAGR as also against
Chain/Sprocket sales revenue CAGR of TIDC. Since CAGR data for
TIDC is available only for 2 years, so, we will consider here only 2
years' CAGR of LGB, Industry and TIDC. It is worthwhile to note here
that LGB's growth is coming on a higher scale which is almost double
than that of TIDC.
LGB's Chain/Sprockets Sales
2 Years' CAGR
TIDC India Chain/Sprockets Sales 2 Years' CAGR
Two Wheeler Industry (OEM)
2 Years' CAGR
33.87 %
25.65 %
19.74 %
Two important things need to be noted in above :
(a) Scale of LGB's Chain/Sprocket sales is more than double at INR
625.84 cr. than that of TIDC at INR 300 cr.
(b) TIDC was constrained by capacity in FY12 wherein, for most of
the 2HFY12, its plants operated at 98-100 % capacity utilisation.
It has drawn up plans for almost 50 % increase in its existing
capacities of Automotive Chains but such additional capacities will
get operational only in 2HFY13, so, even for FY13, TIDC is
expected to remain a significant underperformer vis-a-vis LGB.
We think it proper to mention here the Nationwide ground Auto Spare
Dealers / Service Centers / Workshops feedback that we have
collected for Rolon (LGB's brand) and its competing brands. The
feedback for Rolon has been very positive with no dealer denying
the fact that Rolon enjoys more than 50 % marketshare in
replacement market. The strength of the brand can be gauged by
citing an example of two of the biggest spares dealer-checks of J&K
(North India) who claim that Rolon enjoys more than 70 % marketshare
in aftermarket there. To have such a strong presence in remote North
India too, speaks very well of the brand and its undefeatable position
in the market.
To continue with the ground feedback, aftermarket in India is now
maturing with lots of company workshops opening up who prefer standard
OEM (i.e. company) chains/sprockets only as replacement. This means an
ascending consumption trend towards OE Spares (i.e. replacement market
catered by OEM) where again LGB is a market leader. There is a
presence of lots of chinese and unorganised products too but their use
is limited to hardly 6-7 % of the total consumption as their quality
is far inferior and their use actually creates many other vehicle
issues. Also, consumers are preferring replacing the chain/sprocket
instead of repairing it as the repair-work only extends the life by
350-400 kms. after which again the repair-work needs to be done before
finally replacing it after 3-5 repair sessions.
Now, to continue with our discussion on observatory aspects -- another
interesting aspect which needs to be observed is, the LGB management's
thinking ahead of time, which is not only evident from the steps it
has taken over last 3 decades to maintain and grow its leadership
position in Chains/Sprocket business, but, also to invest ahead of
time in Fine Blanking operations which is now catching up fast and is
emerging as the next growth area in Auto Ancillary segment. Already,
LGB has built a strong foundation in this segment by setting-up
India's largest Fine Blanking Infrastructure and now, to acquire
technological edge as also to tap the high-potential Western Markets,
company has recently signed a LOI to acquire a precision stamping
company in USA. Peers are only now waking up to this space as is
evident from the recent management commentary of TIDC India wherein
it plans to invest heavily in its Fine Blanking Operations going
forward as they see tremendous potential in this segment because of
many four wheeler OEMs setting up shop here.
The fourth and most crucial point to observe in just declared results
of LGB is the declaration of 110 % dividend i.e. Rs. 11 per
share inspite of marginally lower PAT of FY12. Higher dividend payout
highlights two aspects :
– first, Management's Concern towards rewarding its shareholders
thereby giving priority to Minority Shareholders' Wealth Creation
aspect.
-- second, Management's Confidence of continued internal Cash
Generation as otherwise it would have conserved resources for its
core business.
To conclude, continuing with our first IC Report on LG Balakrishnan &
Bros. Ltd. (LGB) dated 28th March 2012, we feel nothing has changed
except the fact that because of dismal profitability in Q4FY12 due to
one-off tough operating conditions of severe power-cuts in its
operating state, the company's share price has corrected ~8 % from our
IC rate of INR 310. Even at the IC rate of INR 310, no positives were
priced-in so we see no reason for the recent correction on the back of
one-off dismal Q4FY12 performance on profitability front.
One crucial thing to note here is the fact that, at the current mcap
of INR 224 cr., company is trading at just 2.1 times its FY12
reported EBITDA of INR 103.6 cr.. which is very low for a company
having a scale of operations at INR 912 cr. and one of the lowest in
entire Auto Ancillary basket with similar scale. Such low valuations
are prevalent inspite of the fact that company has good prospects of
growth atleast for next 3 years based on only Replacement Segment
Demand and such low valuations are just an anomaly because of low IR-
initiatives of the company which can't remain for long. We maintain
our view that stock has to correct to atleast INR 440 levels
sooner rather than later to reflect a reasonable valuation as
compared to its peers.
On Apr 17, 12:38 pm, mahesh <equityanalystinves...@gmail.com> wrote:
> LGBalakrishnan& Bros Ltd has informed BSE that a Meeting of the
> Board of Directors of the Company will be held on April 28, 2012 to
> consider the audited financial results for the quarter / year ended
> March 31, 2012 and to recommend the payment of dividend for the
> financial year 2011-2012
>
> On Apr 2, 10:32 am, "mahesh i. shah" <equityanalystinves...@gmail.com>
> wrote:
>
>
>
> > pfa. Q4FY12 as well as FY12 estimates for PI Industries, Jubilant
> > Industries &LGBalakrishnan& Bros Ltd.
> consider the audited financial results for the quarter / year ended
> March 31, 2012 and to recommend the payment of dividend for the
> financial year 2011-2012
>
> On Apr 2, 10:32 am, "mahesh i. shah" <equityanalystinves...@gmail.com>
> wrote:
>
>
>
> > pfa. Q4FY12 as well as FY12 estimates for PI Industries, Jubilant
>
> > Feel free to get back to me in case of any query.
>
> > Rgds.
>
> > Q4FY12Estimate.pdf
> > 322KViewDownload- Hide quoted text -
> > Feel free to get back to me in case of any query.
>
> > Rgds.
>
> > Q4FY12Estimate.pdf
>
> - Show quoted text -
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