LG Balakrishnan & Bros Ltd. share price target

Spurred by sturdy off take of its value-enhancing metal forming business (+22.7%), LGB's revenue growth in Q3 rose at the highest rate (19.8%) in at least ten quarters , resurrecting its revenue share to 18.6% from just 16.3% a year ago; 9MFY18's at 18.3% Vs 17% in the same period a year ago. Buttressed by higher margins in its effervescent transmission business (11.4% Vs 7.3%) as well as metal forming business (14.1% Vs 6.1%), PBT...

After dropping to multi-quarter low in Q3 largely due to demonetization of high value Indian currency, LGB's sales growth recovered sharply in Q4 (+12.6% ) - at least a twelve quarter high . Revenues of both the transmission and metal forming businesses leapt in excess of 14%, coming at a time when transmission business fodder two-wheeler sales in the country slid 2.3% y-o-y; motorcycle sales dropped 4.2%.. Transmission business EBIT margins expanded too: 9.4% Vs 8.1% in the same quarter a year ago. Sturdy revenue booking of the metal forming...

Strong Q2FY17 Performance, Betting on Further Growth Prospects: LGB posted a strong revenue growth of 17.3% QoQ to Rs.3100 Mn, in Q2FY17compared to Q1FY17. The EBITDA margin expanded by 394 bps in Q2FY17, QoQ and EBITDA increased to 60.3% in Q2FY17 compared to Q1FY17 on a QoQ basis.The company showed a strong volume growth, by 10.1% YoY, including marginal gains in other operating income. PAT has tremendous rise with 122.4% on a QoQ basis with Rs. 211 Mn compared to Rs.95Mn in Q1FY17.

If recent trend in sales of LG Balakrishnan is anything to go by, then the domestic two wheeler industry is showing discernible signs of revival. Income from operations (standalone) jumped 10.1% to Rs 309.95 crs ($46.5m) in Q2 - the best reading in last nine quarters - not least due to hefty rise in bellwether transmission business sales (10.2%), catapulting its revenue share to 79.1%. Slackness in two wheeler industry in last few years could do little to prevent massive rise in transmission business revenue (standalone) share - 78.8% in FY16 from 67.3% in FY13....

LGB manufactures major products like Transmission chains, Forged metal parts and other critical components. LGB occupies 70% market share in supplying Drive chains to the OEMs. Major part of the revenue is generated from domestic market and 10% is from Exports to USA, Europe and Australia. LGB has 17 chain manufacturing units with advanced technical know-how; and with focused innovation, it places great emphasis on R&D;.

LG Balakrishnan & Bros (LGBBL) reported a slightly better-than-expected standalone topline and bottom-line growth for 2QFY2016. The Transmission segment, which contributed ~79% to the companys total standalone revenue, reported a growth of 11% yoy, while the Others segment reported a decline on the sales front. On the bottom-line (standalone) front, the company unperformed due to subdued sales growth and poor operating performance. Top-line grew by ~6% yoy: The standalone top-line grew by ~6% yoy to ~Rs282cr, which is higher than our estimate of ~Rs267cr. The Transmission segment revenue was up ~11% yoy; the segment accounted for ~79% of the standalone revenue of the company. The Others segment reported a decline in sales. Poor operating performance and lower other income mar profitability: The company reported an operating profit of ~Rs36cr, which is down 0.2% yoy. The operating margin contracted by by 74bp yoy to 12.8%, primarily on account of higher employee costs and other expenditure. The reported standalone net profit declined by ~19% yoy to ~Rs17cr, but is higher than our estimate of ~Rs16cr. However, on adjusting for the one-time exceptional gain incurred in 2QFY2015, the PAT during 2QFY2016 actually grew by 5% yoy. Outlook and valuation: LGBBL is a market...