Buy Balmer Lawrie; target of Rs 677: Firstcall Research

Firstcall Research is bullish on Balmer Lawrie and has recommended buy rating on the stock with a target of Rs 677 in its March 26, 2013 research report.

“Balmer Lawrie & Co Ltd was originally set up as a partnership firm by Stephen Balmer and Alexander Lawrie in 1867. It was taken over by IBP Co Ltd, a government company in the year 1972. The company has diversified business interests. It is the largest producer of metal containers in the country with a 23.95 per cent market share. Its products include barrels and drums, freight containers, L P G cylinders, blended oils and compounds, lubricating greases and blended tea. Drums and barrels is the main product accounting for about 24 per cent of sales. Balmer Lawrie is a Mini-Ratna I Public Sector Enterprise, under the Ministry of Petroleum & Natural Gas, with a turnover exceeding Rs 2100 crores and a profit in excess of Rs 180 crores. Along with its five Joint Ventures in India and abroad, it is a much-respected transnational diversified conglomerate with presence in both manufacturing and service sectors.”

“Balmer Lawrie is a market leader in Steel Barrels, Industrial Greases & Specialty Lubricants, Corporate Travel and Logistics Services. It also has significant presence in most other businesses, it operates, viz, Performance Chemicals, Logistics Infrastructure etc. In its 145 years of existence, Balmer Lawrie has been successfully responding to the demands of an ever changing environment, leveraging every change as an opportunity to innovate and emerge a leader in industry. The Quality, Safety and Environment Management systems at all plants are certified to ISO 9001:2000, ISO 14001:2004 standards and OHSAS 18001 Certification.”

“Balmer Lawrie & Co Ltd is a market leader in Steel Barrels, Industrial Greases and Specialty Lubricants, Corporate Travel and Logistics Services reported its financial results for the quarter ended 31st December, 2012. The Third quarter witnesses a healthy increase in overall sales as well as profitability on account, an enhanced Dealers network and robust infrastructural Support system. The company’s net profit Surged to Rs. 324.10 million against Rs. 283.80 million in the corresponding quarter ending of previous year, an increase of 14.20 percent. Revenue for the quarter rose 15.35 percent to Rs. 6459.20million from Rs. 5599.70 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 19.90 a share during the quarter, registering 14.20  percent increase over previous year period. Profit before interest, depreciation and tax is Rs. 526.60 millions as against Rs. 473.70 millions in the corresponding period of the previous year.”

“At the current market price of Rs 599, the stock P/E ratio is at 6.52 x FY13E and 5.92 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.91.90 and Rs.101.24 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 12 percent and 11 percent over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 2.74 x for FY13E and 2.48 x for FY14E. Price to Book Value of the stock is expected to be at 1.27 x and 1.05 x respectively for FY13E and FY14E. The Third quarter witnesses a healthy increase in overall sales as well as profitability on account of well diversified business and powerful combination of exciting products, an enhanced store network and robust infrastructural Support system. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 677 for medium to long term investment,” says Firstcall Research report. 

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