Equinomics:Balmer Lawrie BUY

Equinomics Research & Advisory Pvt Ltd revise the target price of Balmer Lawrie Co. and continue to maintain strong conviction in the stock

Recently, after touching 52 week high of Rs. 605 (and thereby crossing our initial target price of Rs.600), the stock price of Balmer Lawrie Company (BLC) closed at Rs.590. Despite the stock trading near 52 week high, we continue to have strong conviction on the stock for the medium to long term investment.

With the improvement in its business in Q4 FY14 and anticipated recovery in the domestic economy, Equinomics Research expect its performance continue to improve over the next two years.

Equinomics Research expect BLC to grow its net profits at 15% annual growth per annum over the next two years and post an EPS of Rs.73/ for FY2016.  This company is debt free and sitting on a cash pile of Rs. 340 crore. This, nearly 100 year old company, has huge real estate assets across 30 facilities in the country which are worth about Rs.2000 crore in our view.  Considering the fact that the stock trades at 8.2x FY 2016E EPS of Rs.73 as compared to as high as 15 to 25 PE multiples enjoyed by many mid-sized PSUs, revise target price to Rs.730, which is 10x one-year forward EPS. However, if this company is divested, then the stock can become a multi-bagger. Its holding company Balmer Lawrie Investments has given an undertaking in the past to divest its stake in this company and wind up the holding company.

Therefore, there is a possibility of divestment of its stake in Balmer Lawrie Co. Hence, we continue to recommend a BUY on the stock, which trades at Rs.590. We recommend our investors, who can hold on to the stock for another 1 year to continue to buy the stock at the current price of Rs.590/

Disclosure: I, G.Chokkalingam, hold shares of Balmer Lawrie Company and hence, all investors are advised to consider this fact seriously before making any investment decision;

Mr.G.Chokkalingam

Founder & Managing Director

Equinomics Research & Advisory Pvt Ltd

18- 3/A, Ekta CHS, Shiv Dham Complex

(Opp to Oberoi Mall)

Filmcity Road, Malad (East)

Mumbai - 400 097

Ph: +91 22 28492942

chokka.g@equinomics.in

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