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.

December 2016 quarter results

Sales stagnated at Rs 284.05 crore for quarter ended December 2016. This is still a good show in view of fall in two wheeler especially motorcycle (key user industry) sales post demonitisation.

OPM grew 40 basis points to 12.5% which saw OP go up 4% to Rs 35.53 crore.

Other income grew 19% to Rs 62 lakh and interest cost fell 18% to Rs 3.23 crore. As depreciation jumped 11% to Rs 12.52 crore, PBT rose 4% to Rs 20.40 crore. As provision for taxation jumped 57% to Rs 6.46 crore (tax incidence grew from 21.0% to 31.7%), net profit fell 10% Rs 13.94 crore.

Nine months results

For the nine months ended December 2016, sales grew 6% to Rs 858.26 crore.

OPM grew 110 basis points to 12.8% which saw OP go up 16% to Rs 109.47 crore.

Other income grew 15% to Rs 2.57 crore and interest cost fell 15% to Rs 10.84 crore. As depreciation grew 16% to Rs 36.37 crore, PBT rose 23% to Rs 64.83 crore. As provision for taxation jumped 86% to Rs 20.24 crore (tax incidence grew from 20.6% to 31.2%), net profit grew 7% Rs 44.59 crore.

Segment results

For the quarter, sales from the Transmission Division fell 1% to Rs 226.72 crore and accounted for 80% of total. PBIT from the same grew 4% to Rs 19.22 crore and accounted for 81% of total.

For the quarter, sales from the Metal Forming Division grew 8% to Rs 46.53 crore and accounted for 16% of total. PBIT from the same fell 25% to Rs 3.26 crore and accounted for 14% of total.

For the quarter, sales from Others Division stagnated at Rs 10.79 crore and accounted for 4% of total. PBIT fell 30% to Rs 1.22 crore and accounted for 5% of total.

For the nine months, sales from the Transmission Division grew 5% to Rs 675.88 crore and accounted for 79% of total. PBIT from the same grew 18% to Rs 61.26 crore and accounted for 79% of total.

For the nine months, sales from the Metal Forming Division grew 10% to Rs 145.62 crore and accounted for 17% of total. PBIT from the same grew 2% to Rs 12.66 crore and accounted for 16% of total.

For the nine months, sales from Others Division grew 9% to Rs 36.77 crore and accounted for 4% of total. PBIT stagnated at Rs 3.46 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 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 570