Balmer Lawrie is a Government of India undertaking. This is a diversified company which is into various businesses like logistics, tea, industrial packaging, grease and lubricants and travel services. Logistics is a business which accounts for about 25% of their revenues and provides the highest profit margin to them. They have got container freight stations at Mumbai, Kolkata and Chennai.
They have 20 acres of warehousing space in Navi Mumbai, 10 acres in Kolkata and six acres in Chennai and are expanding the space in all the three locations. This company is largest manufacturer of mild steel drums in the country and is also into grease and lubricants business with manufacturing facilities located in Bombay and Kolkata.
If one looks at their financials, FY10 sales were about Rs 200 crore, PAT was about Rs 120 crore which means an EPS of Rs 75 on equity of Rs 16 crore. For the first nine months of the current financial year sales are up by about 25% to about Rs 1,500 crore while PAT is marginally up by 5% to about Rs 87 crore.
They paid a tax of Rs 42 crore for the first nine months. The company has been a regular dividend payer and they paid a dividend of 230% which is Rs 23 in FY10 which means a dividend yield of 4 % of the current market price. If we take a look at their balance sheet, the market cap at the current price is about Rs 950 crore. They have a small equity of about Rs 16 crore and long-term debt of about Rs 100 crore with another Rs 100 crore as working capital loans.
They hold cash and cash balance of roughly Rs 300 crore of the balance sheet and they have also given loans and advances of about Rs 100 crore. So their enterprise value is close to Rs 650-700 crore. Gross block of the company is also Rs 700 crore. This is an 80 year old company sitting on assets most of which are valued at historical costs. So Rs 700 crore on historical costs would be quite a big sum at the current market price.
I believe they are highly undervalued; this has been a consistent dividend payer. If nothing else, they are capable of giving a dividend yield of about 4-5% on an annualized basis. Logistics is a business which has tremendous potential for growth and the stock offers potential appreciation from the current market price.
Source: Internet (moneycontrol.com by Ashish Chug)
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