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

June 2014 quarter results

Sales grew by 12% to Rs 250.40 crore for quarter ended June 2014.

OPM improved by 210 basis points to 12.5% which took OP up 35% to Rs 31.20 crore. Other income stood at Rs 1.17 crore, up 304% and interest cost was down 9% to Rs 4.39 crore. As Depreciation rose 26% to Rs 9.49 crore, PBT jumped 67% to Rs 18.49 crore. As provision for taxation increased 41% to Rs 3.19 crore, net profit jumped 73% to Rs 15.31 crore.

FY 2014 results

For FY 2014 sales grew 5% to Rs 987.92 crore.

OPM improved by 180 basis points to 11.35% which took OP up 25% to Rs 112.08 crore. Other income was up 19% to Rs 4.74 crore and interest cost was down 25% to Rs 16.91 crore. As depreciation rose 8% to Rs 31.37 crore, PBT jumped 62% to Rs 68.53 crore. After providing for for taxation (up 66% to Rs 14.19 crore), net profit jumped 61% to Rs 54.34 crore.

Segment results

For the quarter, sales from the Transmission Division grew 20% to Rs 190.47 crore and accounted for 76% of total. PBIT from the same grew 25% to Rs 19.80 crore and accounted for 87% of total.

For the quarter, sales from the Metal Forming Division grew 24% to Rs 44.56 crore and accounted for 18% of total. PBIT from the same jumped 43% to Rs 5.44 crore and accounted for 24% of total.

For FY 2014, sales from the Transmission Division grew 16% to Rs 729.50 crore and accounted for 74% of total. PBIT from the same grew 30% to Rs 73.93 crore and accounted for 87% of total.

For FY 2014, sales from the Metal Forming Division grew 6% to Rs 165.95 crore and accounted for 17% of total. PBIT from the same jumped 185% to Rs 15.32 crore and accounted for 18% of total.

Dominant market share

The company has a 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.

Two-wheeler industry is growing

The Transmission segment mainly caters to OEM's and Replacement market for two-wheelers. The OEM which constitute about 60% of total sales and includes clients like Bajaj Auto, Hero, Honda, TVS etc all have good growth prospects. On similar account, the replacement market is also doing well and is growing in same line with OEM's.

Valuation

The stock trades at 1:1 ex bonus price of Rs 446.