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.

September 2015 quarter results

Sales grew 6% to Rs 281.54 crore for quarter ended September 2015.

OPM fell 70 basis points to 12.8% which saw OP at Rs 35.91 crore against Rs 35.99 crore.

Other income soared 156% to Rs 1.04 crore and interest cost was up 11% to Rs 4.54 crore. As depreciation grew 4% to Rs 10.49 crore, PBT fell 1% to Rs 21.92 crore. As provision for taxation fell 38% to Rs 4.56 crore, net profit fell 19% Rs 17.35 crore.

Six months results

For the six months September 2015, sales grew 2% to Rs 528.40 crore.

OPM fell 160 basis points to 11.40% which saw OP fall 10% to Rs 60.22 crore.

Other income grew 8% to Rs 1.71 crore and interest cost was up 4% to Rs 8.83 crore. As depreciation grew 2% to Rs 19.96 crore, PBT fell 19% to Rs 33.14 crore. As provision for taxation fell 36% to Rs 6.77 crore, net profit fell 28% Rs 26.37 crore.

FY 2015 results

For FY 2015 sales grew 6% to Rs 1048.26 crore.

OPM had improved 100 basis points to 12.3% which had taken OP up 15% to Rs 128.98 crore. PBT was up 14% to Rs 78.17 crore and PAT had grown 18% to Rs 64.40 crore.

Segment results

For the quarter, sales from the Transmission Division grew 11% to Rs 222.50 crore and accounted for 79% of total. PBIT from the same stood at Rs 19.89 crore (against Rs 19.82 crore) and accounted for 75% of total.

For the quarter, sales from the Metal Forming Division fell 2% to Rs 47.75 crore and accounted for 17% of total. PBIT from the same went down 7% to Rs 4.99 crore and accounted for 19% of total.

For the six months, sales from the Transmission Division grew 70% to Rs 416.25 crore and accounted for 79% of total. PBIT from the same fell 16% to Rs 33.27 crore and accounted for 79% of total.

For the six months, sales from the Metal Forming Division fell 4% to Rs 89.20 crore and accounted for 17% of total. PBIT from the same fell 25% to Rs 8.10 crore and accounted for 19% of total.

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.

Outlook

While first-half performance was adversely affected due to sluggishness in 2-wheeler industry, we expect pick-up from second half as current sluggishness in 2-wheeler industry is only temporary.

Valuation

The company has declared interim dividend of Rs 2.50 per share.

The stock trades at Rs 461.