Balmer Lawrie – A Steady Boat

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  • 26-Nov-2013
  • CMP: Rs 306
  • Small Cap – Mkt Cap 880 crores
  • Advice: Buy with a 2-3 year perspective

Here is a note on Balmer Lawrie & Co (BLC).

Business Overview

  • BLC is a Public Sector Unit under Ministry of Petroleum and Nat Gas. Based in Kolkata, it is rated at as Mini-Ratna I Public Sector Enterprise, and has 62% shareholding by govt.
BLC - Business Segments (JainMatrix Investments)

Fig 1 – BLC Business Segments (JainMatrix Investments) 

  • The FY13 consolidated revenues were Rs 3018 cr and Profits 167 cr.
  • It is quite diversified into both Services (Travel Agency, Logistics, Oilfield Services) and Products (Steel packaging, Greases & Lubes, Chemicals). It has 7 joint ventures in addition to the main standalone firm and has operations in many countries outside India. There are about 1500 employees.

Pricing Snapshot

The share price history of BLC can be seen below:

BLC Price History, JainMatrix Investments, Click to enlarge

Fig 2 – BLC Price History (JainMatrix Investments) Click for enlarged image

  • Dividends have been increasing every year. Current dividend yield is 5.7%.
  • There was a share bonus issue in 2013 of 3:4. Fig 2 dividend percentage has been adjusted for this.
  • Over the last 5 years the share price low is Rs 115 (Dec 2008) and high is 439 (Nov 2010). Today’s CMP of 306 is 30% below the highs, this gives some comfort in valuations.

Finance Snapshot

  • Steady growth over last 5 years with Revenues and Profits up 10.7% per year. See Fig 3. 
  • A look at the financial chart shows that Revenues, EBITDA and Profits are trending up. The equity base has been unchanged (barring a bonus in 2013), and the EPS also has grown 11.2% annually.
  • The steady and rising profits have been shared with shareholders in the form of Dividends.
BLC Financials, JainMatrix Investments

Fig 3 – BLC Financials (JainMatrix Investments) Click for enlarged image

  • The firm has generated Cash steadily with about 100 cr of cash from operations (standalone) in FY13. Not much investments in new assets is happening, though.
  • There is Rs 412 cr of cash & bank balance with the firm (FY13). Less debt, cash on hand is Rs 214/share.  Looking at the cash on the books, a purchase of a share of 306 only costs us Rs 92.
  • Prospects in terms of future are good. Barring 2-3 Private firms, the Petroleum and Natural Gas sector in India is dominated by PSUs.
  • It is a good candidate for government disinvestment, as the current govt shareholding is in a holding company called Balmer Lawrie Investments.
  • Current P/E reported is 5.29, which is quite low. Price/ Book is 1.42 times.
  • Debt/ Equity is 0.26, which is low.
  • One Risk we perceive is low trading volumes for BLC on the exchanges.

Overall Opinion

  • Very good cash position, and strong balance sheet.
  • BLC is a good value buy at this time. Buy with a 2-3 year perspective
  • Don’t expect sharp share price appreciation, it is a steady stock.
  • However if disinvestment to a strategic partner comes through, it could be a bonanza.

JainMatrix Knowledge Base:

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