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.

Quarter results

Sales grew 21% to Rs 409.42 crore for quarter ended December 2018.

OPM fell 190 basis points to 12.7% which saw OP go up 5% to Rs 51.84 crore.

Other income fell 66% to Rs 45 lakh and interest cost grew 9% to Rs 2.34 crore. As depreciation grew 21% to Rs 16.77 crore, PBT fell 4% to Rs 33.17 crore.

EO gains stood at Rs 7.97 crore against NIL after which PBT after EO grew 19% to Rs 41.14 crore. Exceptional item represents Profit on sale of Land including compulsory acquisition by the Department of Highways.

As provision for taxation fell 1% to Rs 11.91 crore (tax incidence fell from 34.8% to 29.0%), net profit grew 30% Rs 29.23 crore.

Nine months results

For the nine months, sales grew 24% to Rs 1200.38 crore.

OPM fell 30 basis points to 13.4% which saw OP go up 21% to Rs 161.14 crore.

Other income fell 8% to Rs 2.15 crore and interest cost fell 6% to Rs 7.09 crore. As depreciation grew 17% to Rs 46.90 crore, PBT rose 25% to Rs 109.31 crore.

EO gains stood at Rs 7.97 crore against NIL after which PBT after EO grew 34% to Rs 117.28 crore. Exceptional item represents Profit on sale of Land including compulsory acquisition by the Department of Highways.

As provision for taxation went up 28% to Rs 38.46 crore (tax incidence fell from 34.5% to 32.8%), net profit grew 38% Rs 78.82 crore.

Segment results

For the quarter, sales of from the Transmission Division grew 19% to Rs 319.03 crore and accounted for 78% of total. PBIT from the same fell 13% to Rs 26.61 crore and accounted for 72% of total.

For the quarter, sales from the Metal Forming Division grew 62% to Rs 90.38 crore and accounted for 22% of total. PBIT from the same grew 16% to Rs 10.35 crore and accounted for 28% of total.

For the quarter, the company did not have any sales and PBIT from others against sales of Rs 2.91 crore and PBIT of Rs -1.73 crore.

For the nine months, sales of from the Transmission Division grew 21% to Rs 945.89 crore and accounted for 79% of total. PBIT from the same grew 11% to Rs 89.48 crore and accounted for 74% of total.

For the nine months, sales from the Metal Forming Division grew 32% to Rs 254.50 crore and accounted for 21% of total. PBIT from the same grew 78% to Rs 31.20 crore and accounted for 26% of total.

For the nine months the company did not have any sales and PBIT from others against sales of Rs 29.18 crore and PBIT of Rs -23 lakh.

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 411.