Thursday, March 12, 2009

Multibagger: Lloyd Electrics

Lloyd Electrics (Rs. 14.00)
BSE Code : 517518
Market Cap : Rs. 45 Cr.
TTM EPS : Rs. 11
Pmt Stake : 32 %
52W H/L : Rs. 131/13.50
P/E Ratio : 1.3x
Dividend : 10 %
Incorporated in 1988, Lloyd Electric and Engineering Ltd (LEEL) was primarily setup as a backward integrated unit of Fedders Lloyd Corp, the leading group company to manufacture coils for air conditioners. Since then it specializes in the custom design and manufacture of heating and cooling coils including ‘U’ bend and return bend tubes for heat exchanger coils, system tubing, header line etc and sheet metal items for air-conditioning and refrigeration applications. Over the year it has emerged as India’s largest manufacturer of evaporator and condenser (E&C) coils with around 60% market share. E&C coils are critical components in AC manufacturing next only to the compressor and account for approximately 20% of the cost of manufacture. Of late, company has got itself forward integrated into lucrative business of contract manufacturing of window/ split air conditioners for various multinational companies in India. Thus it has become an OEM supplier to almost all AC manufacturers in India and its clientele includes Samsung, Electrolux, Carrier, Haier, Voltas, Blue Star, LG, Hitachi, Onida, Symphony, National, Whirlpool, Diakin etc. It even provides customized AC solutions for institutional clients like railways, defence, telecom etc apart from undertaking airconditioning services for luxury buses including Volvo etc. As of now, LEEL derives roughly 60% revenue from coils, 30% revenue from contract manufacturing of AC’s and balance 10% from railways.
Sarcastically, LEEL has neither disclosed the acquisition cost nor it is making the Luvata’s quarterly financial statement public. The company which earned net profit of Rs 55 cr from core business operation last year is now available for Rs 55 cr. Financially, LEEL’s sales fell by 15% to Rs 411 cr and PAT declined by 55% to Rs 20 cr for nine months ending Dec’08. Although the retail demand for air conditioners may remain low in the current calendar year as well, but the sharp fall in copper, steel, aluminium and other metal prices, increased government spending on railways & massive investment by Metro Rail are few of the positive factors for the company. Also not to forget, with extremely low penetration, there is tremendous demand potential for air conditioners in India over the long run. To fund its growth plan LEEL has issued 50 lakh convertible warrants @ Rs 225 per warrant. Considering the current market price, it’s but obvious that warrant holders will let it lapse in March 2009. On a standalone basis it may end FY09 with sales of Rs 500 cr and PAT of Rs 20 cr i.e. EPS of Rs 6 on current equity of Rs 31 cr. With reserves of over Rs 300 cr, Gross block of Rs 224 cr, & debt/equity ratio of 0.45x, it seems all the negatives have been factored in the share price. However, scrip may witness some panic selling as around 23 FII’s including Morgan Stanley, Bank of New York etc are still holding 25% stake in the company. Long term investors can safely accumulate this scrip during panic times to get a multibagger return in 2~3 years.
Source: Internet (Smartinvestment)

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