LGBL is a market leader in two-wheeler automotive chains with ~70% market
share in the OEM segment. The two-wheeler industry is showing signs of recovery,
both in terms of domestic sales as well as exports. This will lead to recurring
business opportunity for auto ancillary companies like LGBL. Going ahead, the
company would improve its volume growth in the automotive chains segment
driven by healthy volume growth at key clients like HMCL, HMSI, Yamaha, TVS
Motor and others (owing to upcoming capacity expansion plans and new
We forecast LGBL to report Net Sales CAGR of ~16% over FY2014-16E to
~Rs1,484cr and Net Profit CAGR of ~12% during the same period to Rs79cr. At the
current market price of Rs497, the stock trades at 11.7x and 9.9x its FY2015E and
FY2016E EPS of Rs42.6 and Rs50.4, respectively. Based on 12x FY2016E EPS, we
arrive at a target price of Rs605 for LGBL, indicating an upside of ~22% from the
current levels. Thus, we recommend a Buy on LGBL.

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