I guess thats more too do with the simplification of maintenance process. Just imagine the hassle of replacing a tyre or taking it out for puncture or various other reassons, if the motor was actually placced at the center of the wheel. I might be wrong but that provides one explaanation.
LG Balakrishnan have de growth, however 12% YoY growth with improvement in margin. Promoter’s son selling is done ( as I do not see regular selling now). I still not figure out, why company is selling at single digit PE, while peers enjoys very high PE.
Anybody have more insights?
Results can be seen here:
https://www.screener.in/company/LGBBROSLTD/consolidated/
Disclosure: Invested.
2 Likes
Impending electrification of automotive industry may impact revenue – The move towards electrification of automobiles might impact the company’s revenues over the medium to long term due to minimal usage of chains in electric 2W in comparison to internal combustion driven 2W. However, the company has plans to diversify its products by reentering into industrial chains with ending of a non-compete clause with an erstwhile JV partner. Further, LGB has been declared as a successful applicant of the corporate insolvency process of RSAL Steel and Private Limited and acquisition of this company would widen the company’s product portfolio. The same coupled with sizeable portion of revenues from the replacement segment and anticipated EV penetration of only 8-10% of new vehicle sales by FY2025 mitigates the risk to an extent.
Credit Rating by ICRA…
4 Likes
Doing further study reveals stocks is trading at single digit PE due to probable reasons:
- Anticipated EV surge, which use less/no chains, which is main product of LGB.
- Promoter’s son selling shares as he has own plans. Comment by Chairman is " He is making Mistake".
- Low promoter holdings at approx. 34%.
- Probable De growth/No Growth.
- Stock not discovered as company do not do concall/analyst meets.
- No chain of command as promoters are elder and son is not interested.
My take:
- Chairman said EV penetration will be gradual and company will look at products for EV. They are prepared.
- Promoter’s son selling, It will finish one day.
- They may bring professional CEO to company.
- Business will not going to stop in near future, as EV penetration will be gradual and replacement market will continue.
- They may start concall/analyst meet.
Strength: - 80 year old company. Sustainable EBIDTA margin of 15 to 18% possible.
- High comfort of valuation.
- 20+ factories, avoid single location risk.
- RSAL take over may bring synergy as it is backward integration.
- Negligible debt.
- NPM 10.8%. ROE 22.8%. ROCE 29%.
Here I see classic case of Head I do not loose much and Tail I win big.
Do anything going to change next week? No. Any positive trigger may re rate stock.
Disclosure; Invested.
3 Likes
To add on :-
- If we look at margins, it improved in fy 21 and 22 that too when steel prices were high. Means company is able to pass through increased RM cost.
- Company has plans to diversify its products by reentering into industrial chains .
- Recent acquisition of of RSAL Steel and Private Limited through corporate insolvency process likely would widen the company’s product portfolio.
1 Like
Has anyone looked at their ability to execute in belts? Any views on why they didn’t go into belts in a big way when the bikes → scooters trend played out within ICE vehicles?
1 Like
Will chains be used in e-motorcycles at least? Thing to watch out for.
1 Like
One of the strong assuring things for people worried about EVs is the presence of Chain transmission on the Ultraviolette F77.
I believe it is LGB who is the supplier of the entire transmission system here.
Any data/buzz/pics on what transmission is likely to be used in EVs/EV Concepts of other strong players like TVS/Bajaj/RE/Honda/etc would be critical.
3 Likes
https://www.bseindia.com/xml-data/corpfiling/AttachLive/94820ee3-6060-49fd-bef0-edeb244faa6e.pdf
Recent presentation provides a comprehensive overview of the company’s product portfolio
1 Like
For those of us waiting, looks like RSAL is finally approved.