Lloyd Electric: An Undervalued Stock

[Ed. Note – This article does not meet our new editorial guidelines, nor does the company profiled meet our investment criteria. Both will be removed from the site in the future.]

Lloyd Electric & Engineering Limited (BSE:517518) is an India-based company with headquarters in New Delhi.  It is the leading and largest producer of Coils / Heat Exchangers (Fin and Tube type) in India and manufactures Air conditioners for the Indian Railways, Metro Rail and Buses according to company’s website. The Company is an original equipment manufacturer supplier to AC manufacturers in India. The company acquired Luvatat Czech in Europe in May 2008 to enhance its present in overseas market. The company compete with Hitachi Home (BSE:523398), Whirlpool (BSE:500238) and Blue Star (BSE:500067) in India.

In recent development the company got the approval by court the scheme of accusation of heat exchanger business of M/s. Perfect Radiators & Oil Coolers Private Limited into Lloyd Electric & Engineering Limited. The board of directors will meet May 30, 2013 to consider annual result and the dividend.

Promoters hold 38.62% stock in the company as per the shareholding patter available by stock exchange at March 2013. The Foreign Institutional Investors (FII), which plays a strong hand in India, holds 10.85%, which is slightly lower than last year same quarter at 12.57%.

(in Million Rs) Dec-12 Sep-12 Jun-12 Mar-12 Dec-11 Mar-12 (Annual)
Revenue 1,955.46 1,633.58 3,119.69 2,888.12 1,873.14 9,050.57
Expenditure 1,673.52 1,425.86 2,801.32 2,572.30 1,696.41 8,115.88
Interest 96.64 80.57 80.87 76.06 72.32 291.26
Net Profit 107.26 61.56 150.41 136.63 51.97 335.86
EPS 3.46 1.99 4.85 4.41 1.68 10.83
OPM % 14.42 12.72 10.21 10.94 9.43 10.33
NPM % 5.49 3.77 4.82 4.73 2.77 3.71

(Source: BSE)

The company has a stable financial history. For the year ending March 2013 it a higher earnings per share than is expected from the previous year. In addition, the company’s operating profit margins and net profit margins have improved as shown in the table. The company has improved its work efficiency and delivered better return for investors.

The Global Industry Analysts, Inc. says, it expects the global air conditioning systems market to reach 144.30 Million units by 2015. According to another report, Asia Pacific is the largest market and held nearly 34.4% of the global air conditioning systems market in 2012. Asia Pacific will maintain its leading position in future due to the increasing demand of air conditioning systems in this region.

According to TV Veopar journal issued last year, “The Indian air-conditioner market in 2011 is estimated at 3.14 million units, a 19 percent decline over last year. LG and Voltas dominated the market with a combined market share of 41 percent. Samsung contributed 12 percent to the market, and Hitachi 7 percent. Other aggressive brands such as Daikin, Panasonic, Blue Star, Godrej, Onida, Videocon, Whirlpool, and Carrier were each in the 4—6-percent sales vicinity. Haier, Sharp, and Electrolux also have some presence.”

The report further says “With effect from January 2012, the Bureau of Energy Efficiency (BEE) has upgraded the energy standards of split air conditioners to a higher level in line with the energy conservation program. All star-rated split units will have a higher energy-efficiency ratio as compared to the same star units last year. Since the new BEE norms call for greater investments to make more energy-efficient products, price hike is imminent on manufacturer’s front. Extra expenses now will be compensated later by the low energy spent on use of these products.”

The Lloyd Electric is trading at mouthwatering price to earning ration of 2.4 at current market price of Rs 35. It is much lower than industry average of 14.5. The company enjoys excellent positioning in the AC market in India and the company has history of stable financial.  The company pays Rs 1 annual dividend yielding 2.86% and having market cap of Rs 1 billion.  The stock is worth buying at current valuation.