LG Balakrishnan’s (LGB) results look as follows.
Revenue grew 33.8% YoY to Rs 1,836 mn, due to improvement in two-wheeler market. The Transmission division which is dependent on two-wheelers has grown at 35.7% growth YoY, with others growing at 40.3%. EBITDA margins have fallen by 270 bps on a YoY basis to 12.4% due to higher raw material costs and employee expenses. The company’s net margins have improved by 40 bps to 6.1% due to lower interest costs due to the redemption of the ICICI bonds, as well as a lower tax rate of 19.0%.
At the current market price of Rs 331, the stock is trading at 6.9x FY11E and 6.1x FY12E the revised estimates of Rs 47.8 and Rs 54.3, respectively. We maintain our Buy rating, with a revised target price of Rs 434 (based on 8.0x revised FY12E EPS of Rs 54.3).
