Balmer Lawrie - Analysis (CMP 540)

You are neither right, nor wrong because the crowd agrees with you, you are right because your data and reasoning are right, it is the fundamental role of an analyst to figure out from data

1. Think of a company available today at 900 crores. It has  cash reserve of about 500 crores impying the actual cost of buying the company is (900-500) = 400 crores.

2.  The company's annual revenues are 2000 crores and Net profit is about 110 crores. That is like saying... Give me rs 400 and i will give you every year Rs 110 as interest. In less than 04 years you recover your investment and assuming the company does not grow,but remains where it is ,  you still keep getting these returns.

 3.  The company has no debt, is over 125 years old and is owned by the GOI.  In addition, after the introduction of 6 pay commision , a number of GOI officrs travel by air. One of the authorised travel agents is this company (:-).  Have a look at the balance sheet and read the above quote. This is a screaming buy with a good margin of safety. Dont expect money to double in 6 months. But it is definitely a steady compounder. Could be a bonus candidate and also a disinvestment candidate.

      

BALMER LAWRIE - PAST HISTORY
Balmer Lawrie started in 1st Februry 1867 at Kolkata. From Tea to Shipping, Insurance to Banking, Trading to Manufacturing - it is present evrywhere. Today, Balmer Lawrie   is involved in  Manufacturing Sector viz, Industrial Packaging, Grease & Lubricants, Leather Chemicals and Travel & Tours, Logistics Infrastructure & Services and Engineering & Technology Services. It is an Indian  PSUs which was     First to globalize operations through a joint venture in Dubai (1978)     First to offer equity shares to employees (1986)     First company in India to issue Commercial Paper in 1990     Always made cash profits since inception in 1867
	2006	2007	%	2008	%	2009	%	2010	%	REMARKS
EQUITY	16.29	16.29		16.29		16.29		16.29
SALES	1244	1291	4	1467	14	1656	13	1635	-1	Consistent
PROFIT	47	70	49	87	24	101	16	108	7	Decreasing rate of increase
DIV	90	135	50	170	26	200	18	230	15	Consistent @ 4% yield
EPS	29	43		53	23	62	17	66	6	Growth
DEBT	0	0		0		0		0
RES	209	254		308	21	372	21	445	20	High reserves.
BOOK VAL	138	165	20	199	238	57	283	71	25	Consistently increasing Book value.
Ops cash Flow	65	82		95		190		85		Positive cash flows
OBSERVATIONS AND CONCLUSIONS
Summary	1. This is an example of a very good company , with excellent management - no dilution, regular dividend
Present pmance	The company has already clocked 61 crores net profit  in 6 M with sales at 1010 crores for Fy 2011.
Dividend	At CMP dividend yield is 4.2 %. Healthy div yield .
Conclusion	If the company continues with its performance  it will be rerated. May be a bonus and disinvestment candidate
Target	Company will be a steady compounder. With paitence it will grow. May clock an EPS of 70+ this year