CMP: 358.

50 MAY 4th, 2019

L.G.BALAKRISHNAN & BROS.LTD
ISIN:
Result Update (PARENT BASIS): Q4 FY19 Overweight
INE337A01034
Index Details SYNOPSIS

L.G.Balakrishnan & Bros Ltd was founded in 1937

Sector Auto Parts & Equipment as a transport Company and has evolved today as a
BSE Code 500250 major manufacturer of chains, sprockets and metal
Face Value 10.00 formed parts for automotive applications.
52wk. High / Low (Rs.) 666.48/358.50
During the quarter, revenue increased by 11.05% to
Volume (2wk. Avg.) 2537
Rs. 3817.20 mn from Rs. 3437.41 mn in the
Market Cap (Rs. in mn.) 11254.18 corresponding quarter ending of previous year.
Annual Estimated Results(A*: Actual / E*: Estimated) During Q4 FY19, EBIDTA is Rs. 416.97 mn as
Years (Rs. in mn) FY19A FY20E FY21E against Rs. 516.68 mn in the corresponding period
Net Sales 15821.04 18257.48 20630.96 of the previous year.
EBITDA 2049.85 2385.09 2672.43 During the quarter, PBT stood at Rs. 253.62 mn as
Net Profit 966.52 1084.97 1244.87 against Rs. 354.71 mn in the corresponding period
EPS 30.79 34.56 39.66 of the previous year.
P/E 11.64 10.37 9.04 During Q4 FY19, the company’s net profit stood at
Rs. 178.34 mn as against Rs. 229.29 mn in Q4
Shareholding Pattern (%)
FY18.
As on Mar 2019 As on Dec 2018 EPS of the company stood at Rs. 5.68 a share
Promoter 47.97 47.97 during the quarter as against Rs. 7.30 per share over
previous year same period.
Public 52.03 52.03
The company has recommended a dividend of Rs.
Others -- -- 5/- per Share of Rs. 10/- each (50% on the face
value of Rs. 10/- each) for the financial year ended
1 Year Comparative Graph March 31, 20 19.
Revenue of the company for FY2018-19 registered
at Rs. 15821.04 mn as against Rs. 13514.39 mn in
FY2017-18, up by 17%.
During FY19, PAT of the company rose by 21% to
Rs. 966.52 mn from Rs. 800.99 mn in FY18.
Net Sales and PAT of the company are expected to
grow at a CAGR of 13% and 17% over 2018 to
L.G.BALAKRISHNAN & BROS. LTD S&P BSE SENSEX 2021E, respectively.

PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

L.G.Balakrishnan & Bros Ltd 358.50 11254.18 30.79 11.64 1.77 50.00
JTEKT India Ltd 100.00 24448.00 1.93 51.81 7.59 50.00
Automotive Axles Ltd 1127.00 17031.20 79.33 14.21 3.83 135.00
Federal-Mogul Goetze (India) Ltd 567.00 31543.40 15.03 36.28 4.87 0.00

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QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q4 FY19,

(Rs. in millions) Mar-19 Mar-18 % Change

Revenue 3817.20 3437.41 11.05%

Net Profit 178.34 229.29 -22.22%

EPS 5.68 7.30 -22.22%

EBIDTA 416.97 516.68 -19.30%

During Q4 FY19, the company’s net profit stood at Rs. 178.34 million as against Rs. 229.29 million in the corresponding
quarter ending of previous year. During the quarter, Revenue stood at Rs. 3817.20 million from Rs. 343.41 million in the
corresponding quarter ending of previous year. Reported earnings per share of the company stood at Rs. 5.68 a share
during the quarter as against Rs. 730 per share over previous year same period. Profit before interest, depreciation and tax
is Rs.416.97 million as against Rs. 516.68 million in the corresponding period of the previous year.

Break up of Expenditure

Value in Rs. Million

Break up of
Expenditure
%
Q3 FY19 Q3 FY18
Change

Cost of Material
1555.22 1653.61 -6%
Consumed

Purchase of Stock in
0.00 0.85 --
Trade

Employee Benefit
585.11 512.85 14%
Expenses
Depreciation and
Amortization 170.79 139.61 22%
expenses

Other Expenses 1049.69 919.78 14%

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Segment Revenue:

COMPANY PROFILE

L.G.Balakrishnan & Bros Limited was founded in 1937 as a transport Company and has evolved today as a major
manufacturer of chains, sprockets and metal formed parts for automotive applications. Its business segments include
transmission, metal forming and others. Its transmission products include chains, sprockets, tensioners, belts and brake
shoe. It also offers metal forming products consisting of fine blanking for precision sheet metal parts, machined
components and wire drawing products for internal use as well as for other chain manufacturing plants, spring steel
suppliers and umbrella manufacturers. The Company’s products are marketed under the “Rolon” brand. LGB has
manufacturing units spread across Tamil Nadu, Maharashtra, Uttarakhand, Karnataka, Haryana and Rajasthan.

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FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as of March 31, 2018 -2021E

FY18A FY19A FY120E FY21E

ASSETS
Non-Current Assets
a) Property, Plant and Equipment 3551.40 4741.09 5452.25 6161.04
b) Capital Work in Progress 264.34 360.58 411.06 460.39
c) Investment Property 111.28 4.94 5.43 5.87
d) Intangible Assets 24.46 24.40 25.38 26.90
e) Financial Assets
i) Investments 673.58 656.48 682.74 703.22
ii) Other Financial Assets 102.46 118.28 133.66 148.36
f) Other Non -Current Assets 209.02 216.02 226.83 235.90
1. Sub Total - Non- Current Assets 4936.54 6121.79 6937.34 7741.67
Current Assets
a) Inventories 2412.81 2895.48 3387.71 3895.87
b) Financial Assets
i) Trade Receivables 1804.43 2072.23 2341.62 2599.19
ii) Cash and Cash Equivalents 61.56 81.97 96.72 111.23
iii) Other Bank Balances 24.24 10.32 11.25 12.15
iv) Other Financial Assets 7.71 7.01 7.29 7.65
c) Current Tax Assets 0.64 81.53 91.31 100.44
d) Other Current Assets 191.68 49.89 53.88 57.11
2. Sub Total - Current Assets 4503.05 5198.41 5989.77 6783.64
3. Assets held for Sale 0.86 107.05 0.00 0.00
Total Assets (1+2+3) 9440.45 11427.25 12927.11 14525.31
EQUITY AND LIABILITIES
EQUITY
a) Equity Share Capital 156.96 313.92 313.92 313.92
b) Other Equity 5425.60 6043.72 7128.69 8373.56
1. Total Equity 5582.56 6357.64 7442.61 8687.48
Non Current Liabilities
a) Financial Liabilities
i) Borrowings 400.96 869.20 938.74 985.67
b) Provisions 105.59 108.86 113.21 118.87
c) Deferred Tax Liabilities (Net) 169.22 201.72 217.86 230.93
2. Sub Total - Non - Current Liabilities 675.77 1179.78 1269.81 1335.48
Current Liabilities
a) Financial Liabilities
i) Borrowings 62.92 786.98 842.07 884.17
ii) Trade Payables 2487.07 2414.40 2638.04 2834.20
iii) Other Financial Liabilities 507.64 499.39 519.37 545.34
b) Other Current Liabilities 120.87 185.28 211.22 234.45
c) Provisions 3.63 3.77 4.00 4.20
3. Sub Total - Current Liabilities 3182.12 3889.83 4214.69 4502.36
Total Equity and Liabilities (1+2+3) 9440.45 11427.25 12927.11 14525.31

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Annual Profit & Loss Statement for the period of 2018 to 2021E

Value(Rs.in.mn) FY18A FY19A FY20E FY21E

Description 12m 12m 12m 12m
Net Sales 13514.39 15821.04 18257.48 20630.96
Other Income 41.12 28.19 29.88 31.67
Total Income 13555.50 15849.23 18287.36 20662.63
Expenditure -11688.82 -13799.39 -15902.27 -17990.19
Operating Profit 1866.69 2049.85 2385.09 2672.43
Interest -97.81 -104.17 -116.67 -129.51
Gross profit 1768.88 1945.67 2268.42 2542.93
Depreciation -541.28 -639.74 -684.53 -725.60
Exceptional Items 0.00 120.50 0.00 0.00
Profit Before Tax 1227.60 1426.43 1583.89 1817.33
Tax -426.61 -459.91 -498.93 -572.46
Net Profit 800.99 966.52 1084.97 1244.87
Equity capital 156.96 313.92 313.92 313.92
Reserves 5425.60 6043.72 7128.69 8373.56
Face value 10.00 10.00 10.00 10.00
EPS 51.03 30.79 34.56 39.66

Quarterly Profit & Loss Statement for the period of 30th Sep, 2018 to 30th, June 2019E

Value(Rs.in.mn) 30-Sep-18 31-Dec-18 31-Mar-19 30-Jun-19E

Description 3m 3m 3m 3m
Net sales 4269.67 4094.16 3817.20 3969.89
Other income 7.87 4.51 6.65 7.18
Total Income 4277.54 4098.67 3823.85 3977.07
Expenditure -3658.27 -3575.83 -3406.88 -3467.70
Operating profit 619.27 522.84 416.97 509.37
Interest -24.58 -23.44 -33.31 -38.64
Gross profit 594.69 499.40 383.66 470.73
Depreciation -157.95 -167.72 -170.79 -179.33
Exceptional Items 0.00 79.74 40.75 0.00
Profit Before Tax 436.74 411.42 253.62 291.40
Tax -156.73 -119.11 -75.28 -91.79
Net Profit 280.01 292.31 178.34 199.61
Equity capital 313.92 313.92 313.92 313.92
Face value 10.00 10.00 10.00 10.00
EPS 8.92 9.31 5.68 6.36

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Ratio Analysis

Particulars FY18A FY19A FY20E FY21E

EPS (Rs.) 51.03 30.79 34.56 39.66
EBITDA Margin (%) 13.81% 12.96% 13.06% 12.95%
PBT Margin (%) 9.08% 9.02% 8.68% 8.81%
PAT Margin (%) 5.93% 6.11% 5.94% 6.03%
P/E Ratio (x) 7.03 11.64 10.37 9.04
ROE (%) 14.35% 15.20% 14.58% 14.33%
ROCE (%) 21.92% 17.60% 18.44% 18.44%
Debt Equity Ratio 0.08 0.26 0.24 0.22
EV/EBITDA (x) 3.22 6.25 5.42 4.86
Book Value (Rs.) 355.66 202.52 237.08 276.74
P/BV 1.01 1.77 1.51 1.30

Charts

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OUTLOOK AND CONCLUSION

 At the current market price of Rs. 358.50 the stock P/E ratio is at 10.37 x FY20E and 9.04 x FY21E respectively.

 Earning per share (EPS) of the company for the earnings for FY20E and FY21E is seen at Rs. 34.56 and Rs. 39.66
respectively.

 Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 17% over 2018 to 2021E,
respectively.

 On the basis of EV/EBITDA, the stock trades at 5.42 x for FY20E and 4.86 x for FY21E.

 Price to Book Value of the stock is expected to be at 1.51 x and 1.30 x for FY20E and FY21E respectively.

 Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment.

INDUSTRY OVERVIEW

The Indian auto-components industry has experienced healthy growth over the last few years. The auto-component
industry of India has expanded by 18.3 per cent to reach at a level of US$ 51.2 billion in FY 2017-18.

The auto-components industry accounts for 2.3 per cent of India’s Gross Domestic Product (GDP) and employs as many
as 1.5 million people directly and indirectly each. A stable government framework, increased purchasing power, large
domestic market, and an ever increasing development in infrastructure have made India a favourable destination for
investment.

The total value of India’s automotive exports stood at US$ 13.5 billion in 2017-18 as compared US$ 10.9 billion in the
year 2016-17. This has been driven by strong growth in the domestic market and increasing globalisation (including
exports) of several Indian suppliers. Growth is further expected to accelerate to 8-10 per cent in FY19 due to pick up in
global scenario.

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According to the Automotive Component Manufacturers Association of India (ACMA), the Indian auto-components
industry is expected to register a turnover of US$ 100 billion by 2020 backed by strong exports ranging between US$ 80-
US$ 100 billion by 2026.

The Foreign Direct Investment (FDI) inflows into the Indian automotive industry during the period April 2000 –
December 2018 were recorded at US$ 20.85 billion, as per data by the Department of Industrial Policy and Promotion
(DIPP).

Government Initiatives

The Government of India’s Automotive Mission Plan (AMP) 2006–2016 has come a long way in ensuring growth for the
sector. Indian Automobile industry is expected to achieve a turnover of $300 billion by the year 2026 and will grow at a
rate of CAGR 15 per cent from its current revenue of $74 billion.

Government has come out with Automotive Mission Plan (AMP) 2016-26 which will help the automotive industry to
grow and will benefit Indian economy in the following ways:-

 Contribution of auto industry in the country’s GDP will rise to over 12 per cent

 Around 65 million incremental number of direct and indirect jobs will be created

 End of life Policy will be implemented for old vehicles

Road Ahead

The rapidly globalising world is opening up newer avenues for the transportation industry, especially while it makes a
shift towards electric, electronic and hybrid cars, which are deemed more efficient, safe and reliable modes of
transportation. Over the next decade, this will lead to newer verticals and opportunities for auto-component
manufacturers, who would need to adapt to the change via systematic research and development.

The Indian auto-components industry is set to become the third largest in the world by 2025. Indian auto-component
makers are well positioned to benefit from the globalisation of the sector as exports potential could be increased by up to
US$ 30 billion by 2021E.

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 Disclosure Section

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 Analyst Stock Weights

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