BALMER LAWRIE & CO. LTD.

Result Update: Q3 FY 13

BUY
Stock Data

CMP Target Price

599.00 677.00 Mar 26th, 2013

ISIN: INE164A01016

Sector Packaging & Logistics BSE Code 523319 Face Value 10.00 52wk. High / Low (Rs.) 710.00 / 511.55 Volume (2wk. Avg ) 7299.00 Market Cap ( Rs in mn ) 9757.70 Annual Estimated Results (A*: Actual / E*: Estimated)

SYNOPSIS
Balmer Lawrie & Co Ltd is the largest producer of metal containers in the country with a 23.95 per cent market share. Balmer Lawrie & Co Ltd is a market leader in Steel Barrels, Industrial Greases and Specialty Lubricants, Corporate Travel and Logistics Services. Board of Directors meeting of Balmer Lawrie & Company Ltd will be held on March 26, 2013, for consideration of 'Declaration of Bonus Shares', in the proportion of 4:3 new shares of Rs. 10 each. The companys net profit Surged to Rs. 324.10 million against Rs. 283.80 million in the corresponding quarter ending of previous year, an increase of 14.20%. The company EBIDA is Rs. 526.60 millions as against Rs. 473.70 mn. in the corresponding period of the previous year. Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 11% over 2011 to 2014E respectively. Balmer Lawrie & Company Ltd is certified to ISO 9001:2000, 14001:2004 standards & OHSAS 18001 Certification.

Years
Net Sales EBITDA Net Profit EPS

FY12A

FY13E

FY14E

P/E Shareholding Pattern (%)

22840.70 2101.40 1380.70 84.76 7.07

26305.65 2347.62 1497.08 91.90 6.52

28410.10 2531.16 1649.18 101.24 5.92

1 Year Comparative Graph

BSE SENSEX Balmer Lawrie & Co. Ltd Source: Company Data, Firstcall Research

Peer Groups Company Name Balmer Lawrie & Co Ltd

CMP (Rs.) 599.00 222.50 315.70 224.30

Market Cap Rs. in mn. 9757.70 59078.30 10117.50 5154.60

EPS (Rs.) 84.76 20.50 15.90 17.89

P/E (x) Ratio 7.07 10.85 19.86 12.54

P/BV(x) Ratio 1.58 2.06 1.47 1.93

Dividend (%) 280.00 0.00 20.00 10.00

Max India Ltd ESS DEE Aluminium Flexituff International

Investment Highlights Results updates- Q3 FY13, Balmer Lawrie & Co Ltd is a market leader in Steel Barrels, Industrial Greases and Specialty Lubricants, Corporate Travel and Logistics Services reported its financial results for the quarter ended 31st December, 2012. The Third quarter witnesses a healthy increase in overall sales as well as profitability on account, an enhanced Dealers network and robust infrastructural Support system.
Months
Net Sales PAT EPS EBITDA

Dec-12

Dec-11

% Change

6459.20 324.10 19.90 526.60

5599.70 283.80 17.42 473.70

15.35% 14.20% 14.20% 11.17%

The companys net profit Surged to Rs. 324.10 million against Rs. 283.80 million in the corresponding quarter ending of previous year, an increase of 14.20%. Revenue for the quarter rose 15.35% to Rs. 6459.20million from Rs. 5599.70 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 19.90 a share during the quarter, registering 14.20 % increase over previous year period. Profit before interest, depreciation and tax is Rs. 526.60 millions as against Rs. 473.70 millions in the corresponding period of the previous year.

Expenditure :

During the quarter total Expenditure rose by 16 per cent mainly on account of increase in cost of Material consumed along with consideration of other expenditure. Total expenditure in Q3 FY13 was at 6067.10 million as against Rs.5246.20 million in Q3 FY12. Cost of Material Rs. 5144.60 against Rs. 4402.60 millions in the corresponding period of the previous year. Other Expenditure were at Rs. 467.80 million and Employee benefits are Rs. 399.90 million in Q3FY13 are the primarily attributable to growth of expenditure.

Segment Revenue

Latest Updates Balmer Lawrie & Company Ltd Board of Directors meeting held on March 26, 2013, had considered and recommended the Bonus Shares,' the issuance of 1,22,14,560 new Equity Bonus Shares of Rs. 10 each, in the proportion of 3 new Bonus shares of Rs. 10 each for every 4 existing fully paid Equity shares of Rs. 10 each

Company Profile
Balmer Lawrie & Co Ltd was originally set up as a partnership firm by Stephen Balmer and Alexander Lawrie in 1867. It was taken over by IBP Co Ltd, a government company in the year 1972. The company has diversified business interests. It is the largest producer of metal containers in the country with a 23.95 per cent market share. Its products include barrels and drums, freight containers, L P G cylinders, blended oils and compounds, lubricating greases and blended tea. Drums and barrels is the main product accounting for about 24 per cent of sales. Balmer Lawrie is a Mini-Ratna I Public Sector Enterprise, under the Ministry of Petroleum & Natural Gas, with a turnover exceeding Rs 2100 crores and a profit in excess of Rs 180 crores. Along with its five Joint Ventures in India and abroad, it is a much-respected transnational diversified conglomerate with presence in both manufacturing and service sectors. Balmer Lawrie is a market leader in Steel Barrels, Industrial Greases & Specialty Lubricants, Corporate Travel and Logistics Services. It also has significant presence in most other businesses, it operates, viz, Performance Chemicals, Logistics Infrastructure etc. In its 145 years of existence, Balmer Lawrie has been successfully responding to the demands of an ever changing environment, leveraging every change as an opportunity to innovate and emerge a leader in industry. The Quality, Safety and Environment Management systems at all plants are certified to ISO 9001:2000, ISO 14001:2004 standards and OHSAS 18001 Certification.

Products & Services Industrial Packaging Greases & Lubricants Performance Chemicals Refinery & Oilfield Services Tea Blending & Packaging Tours & Travel Logistics Services Logistics Infrastructure Engineering & Projects

Joint Ventures & Subsidiaries Balmer Lawrie-Van Leer Limited Balmer Lawrie-Van Leer Limited is a joint venture between Balmer Lawrie & Co. Ltd. and Royal Packaging Industries Van Leer NV (Van Leer Industrial Packaging - A Business of Grief Bros. Corporation, USA). BLVL's products are manufactured by, ISO 9001 certified factories at Turbhe, Navi Mumbai, Chennai & Dehradoon. Steel Drum Closures Plastic Containers in sizes from 10 to 235 litre (Manufactured at Turbhe, Navi Mumbai, Chennai & Dehradoon) AVI-OIL India (P) Ltd. AVI-OIL India (P) Ltd is a joint venture of Indian Oil Corporation Limited (25%), Balmer Lawrie & Co. Ltd. (25%) and NYCO SA of France, established for the indigenous production/supply of Aviation & allied lubricants to the Defence Services, Civil Aviation and the Industrial Sector. Balmer Lawrie (UAE) LLC Balmer Lawrie (UAE) LLC is a joint venture company between HH Sheikh Hasher Maktoum of Dubai (51%) and Balmer Lawrie & Co. Ltd. (49%). The company is engaged in manufacture of wide range of packaging media including Steel Drums & Kegs, Plastic Containers, and Tin Cans etc. Transafe Services Limited Transafe Services Limited (erstwhile Indian Container Leasing Company Limited) is a joint venture between Balmer Lawrie & Co. Ltd. (50%) and Balmer Lawrie Van-leer Ltd (50%). Leasing Operations: Operating lease of Freight Containers, derivatives and other related equipment/ service.

Financial Highlight
Balance sheet as at March31, 2012 (A*- Actuals, E* -Estimations & Rs. In Millions) EQUITY AND LIABILITIES: Shareholders Funds: Share Capital Reserves and Surplus Net worth (a) Non-Current Liabilities: Deferred Tax Liabilities [Net] Other Long Term Liabilities Long Term Provisions Long term liabilities (b) Current Liabilities: Trade Payables Other Current Liabilities Short Term Provisions Current Liabilities Total (a+b+c) Non-Current Assets: Fixed Assets: Tangible Assets Intangible Assets Capital work-in-progress Intangible Asset under Development Non Current Investments Long Term Loans and Advances Current Assets: Inventories Trade Receivables Cash and Bank Balances Short Term Loans and Advances Other Current Assets Total 1233.51 3537.29 3163.65 531.99 52.68 8519.12 11618.21 1258.18 3784.90 3543.29 709.33 54.26 9349.96 13232.18 1270.76 3898.45 3826.75 1035.37 55.35 10086.68 14968.89 2268.34 12.07 49.6 7.59 2337.6 454.23 307.26 761.49 2540.54 11.83 91.26 12.45 2656.08 826.70 399.44 1226.14 2692.97 11.59 158.80 19.79 2883.16 1479.79 519.27 1999.06 2252.27 1619.84 1090.66 4962.77 11618.21 2297.32 1587.44 1156.10 5040.86 13232.18 2343.26 1571.57 1190.78 5105.61 14968.89 12.51 448.25 5.58 466.34 7.26 493.08 4.85 505.19 5.80 517.73 4.42 527.95 162.86 6026.24 6189.1 162.86 7523.28 7686.14 162.86 9172.46 9335.32 2012 2013E 2014E

Annual Profit & Loss Statement for the period of 2011 to 2014E. Value(Rs.in.mn)
Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Reserves Face value EPS

FY11 12m 20189.90 308.90 20498.80 -18537.20 1961.60 -29.90 1931.70 -121.30 1810.40 -599.50 1210.90 162.90 5175.50 10.00 74.33

FY13 12m 22840.70 531.00 23371.70 -21270.30 2101.40 -46.90 2054.50 -151.80 1902.70 -522.00 1380.70 162.90 6026.20 10.00 84.76

FY13E 12m 26305.65 516.62 26822.27 -24474.65 2347.62 -46.48 2301.15 -162.61 2138.54 -641.46 1497.08 162.90 7523.28 10.00 91.90

FY14E 12m 28410.10 542.45 28952.56 -26421.40 2531.16 -47.40 2483.75 -170.74 2313.02 -663.84 1649.18 162.90 9172.46 10.00 101.24

Quarterly Profit & Loss Statement for the period of 30th June, 2012 to 31st March, 2013E Value(Rs.in.mn)
Description Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Face value EPS

30-Jun-12 3m 6643.10 187.80 6830.90 -6126.80 704.10 -9.50 694.60 -38.00 656.60 -200.30 456.30 162.90 10.00 28.01

30-Sep-12 3m 6356.60 116.30 6472.90 -5918.40 554.50 -11.60 542.90 -38.30 504.60 -159.80 344.80 162.90 10.00 21.17

31-Dec-12 3m 6459.20 92.40 6551.60 -6025.00 526.60 -14.50 512.10 -42.10 470.00 -145.90 324.10 162.90 10.00 19.90

31-Mar-13E 3m 6846.75 120.12 6966.87 -6404.45 562.42 -10.88 551.55 -44.21 507.34 -135.46 371.88 162.90 10.00 22.83

Ratio Analysis Particulars

EPS (Rs.) EBITDA Margin (%) PBT Margin (%) PAT Margin (%) P/E Ratio (x) ROE (%) ROCE (%) Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV

FY11 74.33 9.72% 8.97% 6.00% 8.06 22.68% 39.02% 0.00 4.83 327.71 1.83

FY13 84.76 9.20% 8.33% 6.04% 7.07 22.31% 36.41% 0.00 3.14 379.93 1.58

FY13E 91.90 8.92% 8.13% 5.69% 6.52 19.48% 32.66% 0.00 2.74 471.83 1.27

FY14E 101.24 8.91% 8.14% 5.80% 5.92 17.67% 28.94% 0.00 2.48 573.07 1.05

Charts

Outlook and Conclusion At the current market price of Rs.599.00, the stock P/E ratio is at 6.52 x FY13E and 5.92 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.91.90 and Rs.101.24 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 11% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 2.74 x for FY13E and 2.48 x for FY14E. Price to Book Value of the stock is expected to be at 1.27 x and 1.05 x respectively for FY13E and FY14E.

The Third quarter witnesses a healthy increase in overall sales as well as profitability on account of well diversified business and powerful combination of exciting products, an enhanced store network and robust infrastructural Support system. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs.677.00 for Medium to Long term investment. Industry Overview Industrial Packaging SBU-IP offers an extensive range of 165 to 210 litre capacity mild steel barrels from its six manufacturing units spread across the country to serve diverse applications in the Petroleum, Chemicals and Food industries. The Company is the largest manufacturer of steel barrels in the country. The Industrial Packaging Industry is characterized by surplus capacities and a large number of manufacturers, leading to depressed margins. Extension of its product range, leveraging the benefit of its multi- locational presence and well-accepted quality standards across diverse industry segments leading to most preferred supplier status with some customers and nurturing its Leading-edge technology and technical expertise. Outlook Indicative trends point to an equally good, if not better demand in 2011-12. Based on the country achieving its targeted GDP growth, the SBU expects its volume to grow further and market share to remain stable in 2012-13.

Greases & Lubricants Automotive applications account for around 65% of the total lubricant market and the balance would mainly consist of industrial & institutional sectors. The per capita consumption of lubricants in India is still low compared to the developed countries and thus offers more scope for the lubricant industry to grow. Currently, India is the sixth largest market in the world and the third largest in Asia after China and Japan. The lubricant industry in India is dominated by the PSU Oil Companies and MNCs who together have a market share of over 75%, with several other large, medium and Small-scale players making up the rest. Competition is fierce but the Company has the potential to expand the lubricant business on account of its strength in both industrial and automotive sectors. The market remains highly price sensitive. Despite these challenges, in the long-term the overall outlook for the automotive lubricant business appears to be good due to growing Indian economy and increased purchasing power of the consumers. Outlook The lubricant industry has a good growth orientation against the economic back drop. From a strategic perspective, the Company proposes to introduce more and more value-added specialty products for niche markets particularly for the steel and the automobile sectors. Also on the anvil are plans to manufacture ecofriendly / biodegradable lubricants in the Indian market. Currently, the Indian market has only a negligible presence in these types of lubricants.

Logistics Services

Logistics Industry is a sunrise industry which is forecast to grow rapidly at a Compounded Annual Growth Rate (CAGR) of approximately 9%. Available data indicates that the industry turnover lies somewhere in the region of $ 80 billion - $ 100 billion. Much of the industry is fragmented with a mere 10% under the control of the organized sector. The logistics cost in India is estimated at around 13% to 14% of the GDP as against 9% to 10% in the industrialized nations. Higher logistics cost together with the requirement of progressively larger investments in the sector are twin factors which would provide impetus for the growth of the organized sector. One other driver of growth would be the benefits accruing from the long awaited implementation of GST. Outlook Enhanced focus on marketing efforts, especially directed at the Private Sector, has been initiated by the SBU. The SBU expects to show growth both in the top line and bottom line and is exploring possibilities of expanding its business coverage through the opening of new branches in various cities and towns.

Tours & Travel Tourism is not only a growth engine but also an export growth engine and employment generator. According to the Economic Survey 2011-12, the sector has capacity to create large-scale employment both direct and indirect, for diverse sections in society, from the most specialized to unskilled workforce. In India, the tourism sector has witnessed significant growth in recent years. During the period 2006 to 2011, the CAGRs of foreign tourist arrivals (FTA) and foreign exchange earnings (FEE) from tourism (in rupee terms) were 7.2 per cent and 14.7 per cent, respectively. FTAs in India during 2010 were 5.78 million compared to 5.17 million during 2009, posting a growth of 11.8 per cent, much higher than the growth of 6.5 per cent for the world in 2010. FEEs from tourism in rupee terms during 2010 were Rs 64,889 crore (US$ 12.08 billion) compared to Rs 54,960 crore (US$ 10.22 billion) during 2009 with a growth rate of 18.1 per cent. Outlook Strong growth in the services industry in the past few years has led to increased corporate spending on business travel in the country. Also, the increasing rate of income and affordability has enhanced the domestic leisure travel in the country. Even, there has been an increment in the foreign tourist visiting India proving the country to be a favoured tourist destination for leisure, as well as business travel across the globe. With well-equipped infrastructure and the low cost, compared to developed countries has paved Indias way to be a nation growing fast to gain the status of one of the most preferred tourist destinations in the world. Logistics Infrastructure The Logistics container market consists of two major segments viz., (a) Container Freight Station (CFS) and (b) Inland Container Depot [ICD]. The CFSs represent the fastest growing segment in the Logistics container Industry. Increasing international trade and rising containerization in India have fuelled the growth. The CFSs function as extension of the port and helps in decongesting the ports. They provide facilities for storage of containers, customs clearance, aggregat ion and segregation of EXIM Cargo and transportation to and from ports, which are the gateway to international trade. In the last five years, container traffic in Indian Ports has grown at a CAGR of over 12%. However, the total containerised traffic, at major ports in 2010-11, was only 20% of the tonnage handled at these ports. This is quite low compared with statistics pertaining to world sea trade which indicate that nearly 50% thereof is containerized. The total containerized traffic currently in India lies in the range of 8.75 million TEUs per annum and the market size of Indian Container logistics is valued at close to 75 billion. Outlook With the continued growth in the EXIM trade, the SBU expects to accomplish further growth in the coming years. This would be spurred by the increase in handling capacity which is nearing completion at Kolkata and Chennai CFSs. However, competitive pressures would be expected to increase and this is expected to affect margins.

Tea Indias tea production during 2012 was about 965 million Kg down by 14 million Kg from the previous year figure. The drop in product ion was due to erratic weather conditions coupled with pest attack in North Eastern India. There was a diminution in the volume of tea exported as compared to 2009. However, domestic consumption of tea touched 840 million Kg as against 832 million Kg. in the previous year, a growth of around 3%. Tea and, accordingly, the entire infrastructure have been revamped to cater to the increase in activity. The management setup has been made more pro-active and young, energetic, professionally qualified personnel have been inducted in the division. The SBU now possesses a modern packaging unit with the latest automated blending drum, sachet and pouch-packing and Tea bagging machines. The SBU is focused on building up its strength in packing high value-added teas for the domestic market and its overseas buyers. Outlook Plans have been chalked out to launch packed tea in domestic market and to sell the same in select markets utilising the FMCG distribution channel. The SBU proposes to launch high quality CTC tea under the Brand name Tarang and premium quality Darjeeling orthodox and green tea under the Brand name Balmer Lawrie The Tea. Also, on the anvil are plans for coming out with tea bags. In addition, greater opportunity is seen in Contract Packaging.

Refinery & Oilfield Services The Refinery & Oilfield Services portfolio consists of Mechanized Tank Sludge Cleaning & Hydrocarbon Recovery services, not many players are there in the industry. The SBU offers systems for prevention of vapour loss of petroleum products from storage tanks and other technology driven services such as Composite repair service, non-metallic technology for repair of pipelines /storage tanks to avoid unplanned shutdown, preventive external action to check corrosion and decontamination services for refineries and petrochemical plants. Outlook The SBU is working to expand its tie up with relevant international technology suppliers and to intensify the marketing of the technologies. Improved businessProspects are seen in the coming years.

Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.

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