Balmer Lawrie offers potential upside: Chugh

Balmer Lawrie offers potential appreciation from the current market price, says Ashish Chugh, Investment Analyst.

Chugh told CNBC-TV18, "Balmer Lawrie and Company is Government of India undertaking. This is a diversified company into various businesses like logistics, tea, and they are into industrial packaging, grease and lubricants, travel services. Logistics is a business which accounts for about 25% of the revenues of the company and provides highest profit margin to the company. This company has got container freight stations at Mumbai, Kolkata and Chennai."
 
He further added, "This company has 20 acres of warehousing space in Navi Mumbai, 10 acres in Kolkata and 6 acres in Chennai. The company is expanding the space in all the three locations. In industrial packaging this company is largest manufacturer of mild steel drums in the country. The company is also into grease and lubricants business with manufacturing facilities located in Bombay and Kolkata."
"If one looks at the financials of the company 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 9 months of the current financial year sales are up by about 25% to about Rs 1500 crore, PAT is marginally up by just 5% to about Rs 87 crore."
"This company paid the tax of Rs 42 crore for the first 9 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 the balance sheet of the company, the market cap at the current price is about Rs 950 crore. The company has got 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."
 
"This company holds 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 the enterprise value of this company is close to Rs 650-700 crore. Gross block of the company is also Rs 700 crore. The point to be noted is that 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."
"This is a company which I believe is highly undervalued, this has been a consistent dividend payer. If nothing else this company is capable of giving a dividend yield of about 4-5% on an annualized basis. This company is into promising business. Logistics is a business which has tremendous potential for growth and the stock offers potential appreciation from the current market price."