Eye on L.G.Balakrishnan & Bros as a growth stock

22-05-2014 • About L.G.Balakrishnan & Bros ($LGBBROSLTD) • By InTwits

L.G.Balakrishnan & Bros is a growth stock in Auto Parts & Equipment industry. It showed noticeble revenue performance in the last years among with attractive profitability and financial model.

Growth story

L.G.Balakrishnan & Bros showed fast growth in the last financial year. The company's revenue surged on 15.9% in FY2014. Together with revenue growth L.G.Balakrishnan & Bros also managed to keep EBITDA growth. EBITDA grew 40.2% for the same period.

If we look for the longer period the company showed fast revenue growth of 15.8% from FY2011 to FY2014 annually. EBITDA surged on 11.9% from FY2011 to FY2014 annually.

L.G.Balakrishnan & Bros ($LGBBROSLTD) financials for the last 5 years

mln. INR	FY2010	FY2011	FY2012	FY2013	FY2014
Revenue	13,755	7,147	9,127	9,562	11,086
Revenue growth, %		-48.0%	27.7%	4.8%	15.9%
SG&A, %
EBITDA	777	900	1,078	900	1,261
EBITDA growth, %		15.8%	19.9%	-16.5%	40.2%
EBITDA margin, %	5.65%	12.6%	11.8%	9.41%	11.4%
Net Income	244	466	442	327	628
Net Income margin, %	1.77%	6.52%	4.85%	3.42%	5.67%

CAPEX	178	702	322	617	669
CAPEX/Revenue, %	1.29%	9.82%	3.53%	6.45%	6.03%
Debt	1,077	1,181	1,144	1,428	1,295
Cash	15	31	52	98	60
Net Debt/EBITDA	1.4x	1.3x	1.0x	1.5x	1.0x

ROIC, %		20.3%	22.6%	15.2%	21.0%
ROE, %		26.1%	20.6%	13.3%	22.2%

Profitability and return on investment

EBITDA growth was partly attributed to margin expansion. L.G.Balakrishnan & Bros's EBITDA margin surged on 2 pp from 9.40% to 11.4% in FY2014. In the last 3 years L.G.Balakrishnan & Bros showed decline of 1.20 pp from 12.6% in FY2011 to 11.4% in FY2014.

L.G.Balakrishnan & Bros shows attractive ROIC at 21.0% for the last 12 months which assumes stable development model. During the last three years it increased slightly - it was 20.3% in FY2011. Average ROIC for the last three years was 19.6%.

Net Income margin surged on 2.30 pp from 3.40% to 5.70% in FY2014. In the last 3 years Net Income margin dropped on 0.800 pp from 6.50% in FY2011 to 5.70% in FY2014.

L.G.Balakrishnan & Bros operates at ROE of 22.2%. It's average ROE for the last three years was 18.7%.

Capital expenditures (CAPEX)

To this fast growth the company had to invest in CAPEX.In FY2014 L.G.Balakrishnan & Bros had CAPEX/Revenue of 6.03%. The company's CAPEX/Revenue dropped on 3.79 pp from 9.82% in FY2011 to 6.03% in FY2014. For the last three years the average CAPEX/Revenue was 5.34%.

Leverage (Debt)

L.G.Balakrishnan & Bros has low debt level at 1.0x Net Debt/EBITDA - at the same time with high growth. In the longer period the company's leverage dropped on 0.30x from 1.28x in FY2011 to 0.98x in FY2014.

Valuation vs. comparable companies

The market closed today at 4.5x EV/EBITDA for L.G.Balakrishnan & Bros which is 72.1% lower than 16.0x Auto Parts & Equipment peer group avearge calculated on the basis of 122 companies. The market closed today at 7.0x P/E for L.G.Balakrishnan & Bros which is 62.1% lower than 18.5x Auto Parts & Equipment peer group avearge calculated on the basis of 16 companies.

For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The market closed today at 9.5x EV/(EBITDA-CAPEX) for L.G.Balakrishnan & Bros which is 4.78% higher than 9.1x Auto Parts & Equipment peer group avearge calculated on the basis of 14 companies.

Peers in Auto Parts & Equipment

Below we provide L.G.Balakrishnan & Bros benchmarking against other companies in Auto Parts & Equipment industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Exide Industries ($EXIDEIND)		-59.6%	11.5%	19.7%	30.6%
Gabriel India ($GABRIEL)		-43.2%	16.0%	7.2%	6.6%
Shanthi Gears ($SHANTIGEAR)		-7.0%	6.1%	-16.6%	4.9%
Tube Investments Of India ($TUBEINVEST)		-39.5%	17.2%	0.1%	1.6%
Ucal Fuel Systems ($UCALFUEL)		-28.8%	12.1%	-3.9%	-1.5%

Median (6 companies)		-34.1%	11.8%	-1.9%	3.2%
L.G.Balakrishnan & Bros ($LGBBROSLTD)		-48.0%	27.7%	4.8%	15.9%

Top companies by EBITDA margin, %

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Tube Investments Of India ($TUBEINVEST)	7.2%	33.7%	18.4%	24.4%	28.3%
Shanthi Gears ($SHANTIGEAR)	27.8%	44.6%	37.9%	30.2%	27.8%
Amtek Auto ($AMTEKAUTO)			25.1%		20.7%
Exide Industries ($EXIDEIND)	8.3%	20.0%	14.3%	13.5%	13.8%
Ucal Fuel Systems ($UCALFUEL)	4.7%	14.0%	12.5%	10.3%	9.7%

Median (7 companies)	7.7%	17.0%	14.3%	11.9%	13.8%
L.G.Balakrishnan & Bros ($LGBBROSLTD)	5.6%	12.6%	11.8%	9.4%	11.4%

Top companies by CAPEX/Revenue, %

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Amtek Auto ($AMTEKAUTO)			18.9%		27.1%
Tube Investments Of India ($TUBEINVEST)	2.1%	4.7%	6.0%	8.0%	6.2%
Shanthi Gears ($SHANTIGEAR)	2.2%	7.5%	4.7%	4.7%	3.2%
Gabriel India ($GABRIEL)	1.8%	5.8%	3.1%	5.8%	3.1%
Automotive Stampings & Assemblies ($ASAL)	1.8%	5.3%	4.0%	4.5%	2.1%

Median (7 companies)	1.8%	6.0%	4.7%	4.6%	3.1%
L.G.Balakrishnan & Bros ($LGBBROSLTD)	1.3%	9.8%	3.5%	6.5%	6.0%

Top companies by ROIC, %

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Exide Industries ($EXIDEIND)	45.9%	34.2%	24.2%	24.3%	29.5%
Gabriel India ($GABRIEL)	14.5%	20.3%	19.9%	15.5%	18.0%
Ucal Fuel Systems ($UCALFUEL)	2.1%	13.8%	13.5%	9.3%	8.4%
Shanthi Gears ($SHANTIGEAR)	7.6%	17.9%	14.8%	5.6%	6.1%
Tube Investments Of India ($TUBEINVEST)	9.1%	14.1%	4.7%	4.5%	4.2%

Median (9 companies)	12.3%	17.9%	13.5%	11.6%	7.2%
L.G.Balakrishnan & Bros ($LGBBROSLTD)		20.3%	22.6%	15.2%	21.0%

Top companies by Net Debt / EBITDA

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Tube Investments Of India ($TUBEINVEST)	5.8x	8.1x	17.6x	17.8x	17.3x
Automotive Stampings & Assemblies ($ASAL)	1.8x	1.8x	1.1x	3.9x	6.3x
Ucal Fuel Systems ($UCALFUEL)	8.4x	4.1x	4.3x	5.6x	5.7x
Amtek Auto ($AMTEKAUTO)			4.8x		5.3x
Gabriel India ($GABRIEL)	2.2x	1.6x	1.2x	0.9x	0.7x

Median (9 companies)	1.8x	1.6x	1.2x	1.9x	0.7x
L.G.Balakrishnan & Bros ($LGBBROSLTD)	1.4x	1.3x	1.0x	1.5x	1.0x

L.G.Balakrishnan & Bros stock price chart

L.G.Balakrishnan & Bros financials

mln.	FY2010	FY2011	FY2012

Revenue	13,755	7,147	9,127
EBITDA	776.8	899.6	1,078
Net income	243.9	466.1	442.3
CAPEX	178.0	701.9	322.2
Debt	1,077	1,181	1,144
Cash	14.687	30.854	52.081

About L.G.Balakrishnan & Bros

L.G. Balakrishnan & Bros Limited manufactures and sells roller chains, sprockets, and metal formed parts for automotive applications primarily in India. It operates in Transmission, Metal Forming, and Others segments. The company offers transmission products comprising automotive chains, such as motorcycle and moped drive chains, timing chains/engine mechanism chains, and automotive kits; sprockets; tensioners; cogged belts; and brake shoes. It also provides 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, umbrella manufacturers, etc. The company markets its products under the ROLON brand. L.G. Balakrishnan & Bros Limited also exports its products to the United States, Europe, and Australia, New Zealand, South Africa, Japan, and the Far and Middle East countries. The company was founded in 1937 and is based in Coimbatore, India.