Balmer Lawrie & Co. :: CENTRUM WEALTH: Top 10 Diwali Picks

Balmer Lawrie & Co (BLC), a 100-year old zero-debt, cash & asset rich company, is a rare player in the logistics segment with huge real estate & land assets spread over more than 30 locations mainly in metros in India. It has major presence in industrial packaging, lubricants, logistics services, travel and tours;
BLC has declared a dividend of Rs.28/share for FY2012 and we expect it to declare a minimum dividend of Rs.30/share in FY2013 thus giving a dividend yield of 4.7% at the current market price. Cash on books of Rs.316 crore as on March 31, 2012 is around 30.5% of the current market cap of BLC – hence, being a PSU, there exists opportunity for possible special dividend;
BLC has posted impressive growth during the period FY2002-FY2012, while BLC’s total income increased nearly 3.4 times to Rs.2,671 crore, but net profit increased more than 7 fold to Rs.148 crore. BLC has consistently increased the dividend 16-fold from Rs.1.80 for FY2002 to Rs.28 per share for FY2012;
Balmer Lawrie Investments Ltd. (BLIL), the holding company for BLC, has given an undertaking to the regulator (RBI) that it will divest its stake in BLC (source: www.blinv.com). Being asset-rich, this provides multi-bagger opportunity in long term;
BLC in its AGM has declared that it plans to invest Rs.300-500 crore in next 2-3 years in new projects like a container manufacturing facility at Navi-Mumbai (~Rs.100 crore), a multi-modal logistic hub at Visakhapatnam (~Rs.150 crore), an independent facility for producing construction chemical in Chennai (~Rs.40 crore) and a travel portal (~Rs.25 crore);
BLC has aggressive expansion plans:
–Earmarked $7 million for in-organic growth and foraying into the Rs.1,800 crore construction chemical business
–Focus on branding by launching new packaging for ‘Balmerol’, with its goal to emerge as a globally competitive, transnational lubricants solution and service provider
–Its subsidiary, Balmer Lawrie (UK) is proposing acquisitions outside India
–Set to launch online booking portal & focused packages for its high growing Travel & Tours business, which contributes ~40% to the revenues and 13% of the PBIT
We believe BLC is well placed to benefit and can emerge as a multi-bagger if the divestment takes place. Considering that it is a high-dividend yield, zero debt-cash rich company and is currently trading at a low PE of 5.5x FY2014E EPS of Rs.116.2, we recommend a BUY on the stock with a fair value of Rs.750, offering a potential return of 17.2% from the current levels;

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