Comments
CD Equisearch
LG Balakrishnan (Buy)
CMP: ₹379.8
Target: ₹544
LG Balakrishnan (LGB) manufactures roller chains and undertakes metal forming, including warm and cold forging, fine blanking and machined parts.
Fortified by no smallish rise in revenues of metal forming business (up 37.5 per cent), overall revenues rose by a barely depressing 21.5 per cent last quarter. Belying historical trends, revenues of its flagship transmission business has grown in high double digits for three quarters in a row , galvanised by overall volume growth in excess of 20 per cent in 9MFY19, thus reflecting gains in OEM market share.
Buoyancy in both fine products and machining business drove recovery in metal forming business, whose revenues surge by a gravity defying 32.4 per cent in the first nine months of the current fiscal compared to that in the same period a year ago. Ample scope exists for capacity ramp up at this plant as and when required. Amplified by modest volume growth (in excess of 10 per cent for both the bossiness) earnings are projected to rise 16.4 per cent on mid-teen growth in revenues.
On balance we maintain our buy rating on the stock with target of ₹544 (previous target: ₹662) based on 14x FY20e earnings.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.