Buy LG Balakrishnan and Bros; target of Rs 739: CD Equisearch

CD Equisearch is bullish on LG Balakrishnan and Bros has recommended buy rating on the stock with a target price of Rs 739 in its research report dated February 23, 2023.

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February 27, 2023 / 12:53 IST

26 Aug, 2025 12:21

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CD Equisearch's research report on LG Balakrishnan and Bros

Barely unaffected by slowdown in exports, particularly in US markets, LGB's revenues nearly flat lined last quarter, while increases in employee costs and cost inflation precipitated 7.5% drop in operating profit to Rs 106.98 crs from Rs 115.67 crs. Whence, OPM shriveled to 18.4% from 20.2% in Q3 of previous fiscal. Despite more than doubling of other income, PBT declined by 1.8% to Rs 92.84 crs from Rs 94.62 crs, while post tax earnings (consolidated) advanced by 1.5%. Little surprisingly, LGB's transmission business accounts for much of the increase in earnings at a time when overall volumes (metal forming included) grew by little enthusing 7.8% in the first nine months of the current fiscal. With pass through mechanisms in place - though sometimes with a lag - transmission business EBIT margin all but flat lined to 18.4% in 9MFY23, at a time when its volumes grew by just 8%, thus underscoring improved pricing power. Despite pass through mechanisms in place, LGB does not seem to have any competitive advantage in sourcing main raw materials like steel.

Outlook

Weighing odds, we assign hold rating on the stock with revised target of Rs 739 (previous target: Rs 682) based on 8x FY24e earnings, over a period of 6-9 months.

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