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 f acilities 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.

June 2016 quarter results

Sales grew 7% to Rs 264.27 crore for quarter ended June 2016.

OPM grew 90 basis points to 10.8% which saw OP go up 17% to Rs 28.41 crore.

Other income grew 27% to Rs 86 lakh and interest cost fell 8% to Rs 3.93 crore. As depreciation jumped 22% to Rs 25.34 crore, PBT rose 23% to Rs 13.75 crore. As provision for taxation jumped 92% to Rs 4.25 crore (tax incidence grew from 19.7% to 30.9%), net profit grew 6% Rs 9.51 crore.

FY 2016 results

In FY 2016, sales had grown 4% to Rs 1090.10 crore. OPM had fallen 80 basis points to 11.5% which had seen OP fall 3% to Rs 125.78 crore.

PBT was down 10% to Rs 70.37 crore. EO gains were NIL against Rs 6.60. Thus PBT after EO had fallen 17% to Rs 70.37 crore.

Net profit was down 11% Rs 57.45 crore.

Segment results

For the quarter, sales from the Transmission Division grew 5% to Rs 204.07 crore and accounted for 77% of total. PBIT from the same fell 8% to Rs 12.28 crore and accounted for 69% of total.

For the quarter, sales from the Metal Forming Division grew 13% to Rs 47.38 crore and accounted for 18% of total. PBIT from the same grew 75% to Rs 5.45 crore and accounted for 31% of total.

PBIT of Others stood at a loss of Rs 4 lakh against a loss of Rs 98 lakh and accounted for 0% of total.

In FY 2016, sales from the Transmission Division had grown 7% to Rs 859.47 crore and had accounted for 79% of total. PBIT from the same had fallen 12% to Rs 68.81 crore and had accounted for 79% of total.

In FY 2016, sales from the Metal Forming Division were down 2% to Rs 180.91 crore and had accounted for 17% of total. PBIT from the same had fallen 22% to Rs 18.14 crore and had accounted for 21% of total.

PBIT of Others stood at a loss of Rs 10 lakh against a loss of Rs 6.66 crore and accounted for 0% of total.

Consolidated FY 2016 results

In FY 2016, on consolidated basis, sales grew 3% to Rs 1205.30 crore. OPM fell 70 basis points to 11.4% which saw OP fall 3% to Rs 137.68 crore.

PBT was down 11% to Rs 77.78 crore.

EO gains were NIL against Rs 6.61. Thus PBT after EO was down 17% to Rs 77.78 crore.

Net profit was down 11% to Rs 63.50 crore.

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.

Valuation

The stock trades at Rs 470