LGBL acquired Fine Blanking technology in Mid ‘80s for manufacturing Chain plates. It further extended its fine blanking division as a separate manufacturing during the late ‘90s, to cater to high OEM demands for Fine Blanked components. Today, LGBL is a leading Fine Blanking Manufacturer having many Fine Blanking Presses in operation.

The company has 17 chain manufacturing plants, all ISO 9001 certified by Underwriters Laboratories Inc., USA. Three of the manufacturing facilities along with the central functions have been registered to ISO/TS 16949 by UL, USA.

LGB is also evolving itself to become a Metal Forming company concentrating on Hot, Warm & Cold forging, Blanking, Fine blanking & Precision machined parts.

Quarter results

Sales grew 11% to Rs 381.72 crore for quarter ended March 2019.

OPM fell 390 basis points to 10.7% which saw OP go down 18% to Rs 41.03 crore.

Other income fell 53% to Rs 66 lakh and interest cost grew 49% to Rs 3.33 crore. As depreciation grew 22% to Rs 17.08 crore, PBT fell 40% to Rs 21.29 crore.

EO gains stood at Rs 4.08 crore against NIL after which PBT after EO fell 28% to Rs 25.36 crore. Exceptional item represents Profit on sale of Land including compulsory acquisition by the Department of Highways.

As provision for taxation fell 40% to Rs 7.53 crore (tax incidence fell from 35.4% to 29.7%), net profit fell 22% Rs 17.83 crore.

FY 2019 results

In FY 2019, sales grew 20% to Rs 1582.10 crore.

OPM fell 110 basis points to 12.8% which saw OP go up 11% to Rs 202.17 crore.

Other income fell 31% to Rs 2.82 crore and interest cost rose 7% to Rs 10.42 crore. As depreciation grew 18% to Rs 63.97 crore, PBT rose 6% to Rs 130.59 crore.

EO gains stood at Rs 12.05 crore against NIL after which PBT after EO grew 16% to Rs 142.64 crore. Exceptional item represents Profit on sale of Land including compulsory acquisition by the Department of Highways.

As provision for taxation went up 8% to Rs 45.99 crore (tax incidence fell from 34.8% to 32.2%), net profit grew 21% Rs 96.65 crore.

Segment results

For the quarter, sales of from the Transmission Division grew 12% to Rs 301.05 crore and accounted for 79% of total. PBIT from the same fell 24% to Rs 17.83 crore and accounted for 67% of total.

For the quarter, sales from the Metal Forming Division grew 9% to Rs 80.67 crore and accounted for 21% of total. PBIT from the same fell 44% to Rs 8.97 crore and accounted for 33% of total.

For the quarter, the company did not have any sales and PBIT from others against sales of Rs 1.12 crore and PBIT of Rs 17 lakh.

For FY 2019, sales of from the Transmission Division grew 18% to Rs 1246.93 crore and accounted for 79% of total. PBIT from the same grew 3% to Rs 107.31 crore and accounted for 73% of total.

For FY 2019, sales from the Metal Forming Division grew 25% to Rs 335.17 crore and accounted for 21% of total. PBIT from the same grew 20% to Rs 40.17 crore and accounted for 27% of total.

For FY 2019, the company did not have any sales and PBIT from others against sales of Rs 30.31 crore and PBIT of Rs -6 lakh.

FY 2019 consolidated results

On consolidated basis for FY 2019 Sales grew 19% to Rs 1687.99 crore. PBT before EO stagnated at Rs 130.57 crore. EO gains stood at Rs 12.05 crore against NIL after which PBT after EO grew 16% to Rs 142.64 crore. Exceptional item represents Profit on sale of Land including compulsory acquisition by the Department of Highways. Thus PBT after EO grew 9% to Rs 162.62 crore and PAT grew 11% to Rs 99.65 crore.

FY 2019 consolidated segment results

For FY 2019, consolidated sales of from the Transmission Division grew 18% to Rs 1246.93 crore and accounted for 74% of total. PBIT from the same grew 3% to Rs 107.31 crore and accounted for 72% of total.

For FY 2019, consolidated sales from the Metal Forming Division grew 28% to Rs 441.07 crore and accounted for 26% of total. PBIT from the same fell 4% to Rs 40.99 crore and accounted for 28% of total.

For FY 2019, the company did not have any sales and PBIT from others against sales of Rs 30.31 crore and PBIT of Rs -6 lakh.

Dominant market share

The company has around 70% market share in the OEM chains segment and around 50% market share in the replacement segment.

The company's chain manufacturing plants are all ISO 9001 certified by Underwriters Laboratories Inc., USA. Three of the manufacturing facilities along with the central functions have been registered to ISO/TS 16949 by UL, USA.

The technology is the entry barrier in this business as the chains are precision components. As the vehicles become more and more sleek and powerful, chain quality has to improve. Strong reverse engineering department enables the company in introducing new products. ROLON brand of the company enjoys premium in the market.

Well geared for the future

It has invested heavily in the last four years and an amount of almost Rs 285.03 crore has been spent in upgrading its existing facilities as well as in expanding capacities.

The company is geared for the future and is confident that it shall continue to march ahead.

Valuation

The stock trades at Rs 380.