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L G Balakrishnan & Bros (LGBL) is the flagship company of ELGI Group, and is one of the leading suppliers of transmission chains to the automobile industry under the popular brand name ‘ROLON'. Transmission chains are also known as automotive chains.
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 2018 quarter results
Sales grew 29% to Rs 364.00 crore for quarter ended June 2018.
OPM grew 180 basis points to 13.2% which saw OP go up 50% to Rs 48.16 crore.
Other income grew 60% to Rs 92 lakh and interest cost fell 20% to Rs 2.28 crore. As depreciation grew 11% to Rs 14.33 crore, PBT rose 92% to Rs 32.46 crore. As provision for taxation jumped 86% to Rs 10.88 crore (tax incidence fell from 34.7% to 33.5%), net profit grew 96% Rs 21.58 crore.
FY 2018 results
Sales grew 14% to Rs 1302.63 crore for FY 2018.
OPM improved 80 basis points to 13.9% which saw OP grow 20% to Rs 180.42 crore.
Other income grew 6% to Rs 4.60 crore and interest cost fell 26% to Rs 9.67 crore. As depreciation grew 8% to Rs 53.16 crore, PBT rose 33% to Rs 122.20 crore. As provision for taxation jumped 65% to Rs 42.56 crore (tax incidence grew from 28.0% to 34.8%), net profit grew 21% Rs 79.64 crore.
Consolidated results
On consolidated basis sales grew 13% to Rs 1418 crore for FY 2018. Net profit grew 19% Rs 89.48 crore.
Segment results
For the quarter, sales of from the Transmission Division grew 18% to Rs 289.23 crore and accounted for 79% of total. PBIT from the same grew 74% to Rs 29.40 crore and accounted for 82% of total.
For the quarter, sales from the Metal Forming Division grew 34% to Rs 74.77 crore and accounted for 21% of total. PBIT from the same grew 118% to Rs 6.54 crore and accounted for 18% of total.
The company did not have any sales and net profit from others against sales of Rs 16.74 crore and PBIT of Rs 57 lakh.
For FY 2018, sales from the Metal Forming Division stood at Rs 255.76 crore and accounted for 19% of total. PBIT from the same grew 76% to Rs 32.93 crore and accounted for 24% of total.
For FY 2018, sales from Others Division stood at Rs 30.23 crore and accounted for 2% of total. PBIT stood at a loss of Rs 6 lakh against a profit of Rs 5.01 crore.
Other details
The Board of Directors at its meeting held on 6th May 2017 had given an in principle approval for merger of its wholly owned subsidiary BCW V Tech India P Ltd with the company with effect from 1 April 2017 under a scheme of amalgamation, subject to appropriate National Company Law Tribunal (NCL T) and Other approvals. The Hon'ble NCLT Chennai vide its order dt. 13.07.2018 has sanctioned the scheme of amalgamation. Accordingly the accounts of BCW V Tech India P Ltd have been merged with the accounts of LG Bala with appointed date as 1 Aprii 2017.
All figures in the result are post merger of the subsidiary company.
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 561.
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