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.

September 2016 quarter results

Sales grew 10% to Rs 309.85 crore for quarter ended September 2016.

OPM grew 190 basis points to 14.7% which saw OP go up 27% to Rs 45.53 crore.

Other income grew 5% to Rs 1.09 crore and interest cost fell 19% to Rs 3.68 crore. As depreciation jumped 17% to Rs 12.27 crore, PBT rose 40% to Rs 30.68 crore. As provision for taxation jumped 109% to Rs 9.53 crore (tax incidence grew from 20.8% to 31.1%), net profit grew 22% Rs 21.14 crore.

Half year results

For the six months ended ended September 2016, sales grew 9% to Rs 574.22 crore.

OPM grew 150 basis points to 12.9% which saw OP go up 23% to Rs 73.94 crore.

Other income grew 14% to Rs 1.95 crore and interest cost fell 14% to Rs 7.61 crore. As depreciation jumped 20% to Rs 23.85 crore, PBT rose 34% to Rs 44.43 crore. As provision for taxation jumped 103% to Rs 13.78 crore (tax incidence grew from 20.4% to 31.0%), net profit grew 16% Rs 30.65 crore.

Segment results

For the quarter, sales from the Transmission Division grew 10% to Rs 245.09 crore and accounted for 79% of total. PBIT from the same grew 48% to Rs 29.64 crore and accounted for 85% of total.

For the quarter, sales from the Metal Forming Division grew 9% to Rs 51.71 crore and accounted for 17% of total. PBIT from the same fell 21% to Rs 3.95 crore and accounted for 11% of total.

For the quarter, sales from Others Division grew 12% to Rs 13.15 crore and accounted for 4% of total. PBIT fell 38% to Rs 1.39 crore and accounted for 4% of total.

For the six months, sales from the Transmission Division grew 8% to Rs 449.15 crore and accounted for 78% of total. PBIT from the same grew 25% to Rs 42.04 crore and accounted for 78% of total.

For the six months, sales from the Metal Forming Division grew 11% to Rs 99.09 crore and accounted for 17% of total. PBIT from the same grew 16% to Rs 9.40 crore and accounted for 18% of total.

For the six months, sales from Others Division grew 13% to Rs 25.97 crore and accounted for 5% of total. PBIT grew 31% to Rs 2.24 crore and accounted for 4% 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.

Well geared for the future

It has invested heavily in the last four years and an amount of almost Rs 285.03 crore have 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 690