Lloyd Electric & Engineering - Rs.138.00

Incorporated in 1987 and belonging to the Delhi based Punj Group, Lloyd Electric & Engineering Ltd. (LEEL) is in the business of manufacturing heat exchanger coils and sheet metal items for air-conditioning and refrigeration applications. In fact, it is India’s largest manufacturer of evaporator and condenser (E&C) coils for air conditioners. E&C coils are critical components in AC manufacturing next only to the compressor and account for approximately 20% of the cost of manufacture. Importantly, LEEL is the only Indian company to get US certification of quality for its E&C coils. The company also undertakes contract manufacturing to assembled room ACs, which are then sold by the OEMs under their respective brand names. LEEL is an OEM supplier to almost all AC manufacturers in India and it clientele includes Samsung, Electrolux, Carrier, Haier, Voltas, Blue Star, LG, Hitachi, Whirlpool, Diakin and the Indian Railways. Besides, it also exports its products to the Middle East, Australia, Asia and Africa.

LEEL has two manufacturing facilities located at Bhiwadi in Rajasthan and Kala-Amb in Himachal Pradesh. Recently, it has set-up a new manufacturing unit in Dehradun (Uttaranchal) to manufacture room air-conditioners, components of air-conditioners and electronic goods. The Bhiwadi plant has a capacity to produce 625,000 coils and assemble 20,000 ACs per year. The Kala-Amb plant can manufacture 400,000 coils and assemble 2,00,000 AC’s per annum. The biggest positive for the company is that it enjoys a 10 year excise duty and income tax exemption at its Kala-Amb and Dehradun facilities and would be paying sales tax at a concessional rate of 1% as compared to the normal 4%. Hence it is economical for AC manufacturers to outsource their manufacturing to LEEL making it a win-win strategy for both. Besides, the company has signed a MoU with Air International Transit Pty Limited, an Australia-based company for designing, manufacturing and supplying of AC package units to Metro Rail Corporation in India. It has also tied up with a Korean company, Hanyung Alcobis, for the manufacture of roll bond and frost-free coils for refrigerators. To cater to the rising contract manufacturing demand, LEEL is planning to double its AC assembling capacity to 400,000 units per year in the near future.

Last fiscal, LEEL raised around Rs.130 cr. through a GDR issue to be converted into equity at Rs.140 per share. Moreover, recently it got Rs.45 cr. by converting 40 lakh warrants issued in August 2005 into equity shares at Rs.125 per share. It reported very encouraging numbers for the December’06 quarter and is estimated to end this fiscal with sales of Rs.475 cr. with net profit of Rs.43 cr. This works out to an EPS of Rs.14 on its diluted equity of Rs.31 cr. For FY08, it may post an EPS of Rs.18. Notably, FII’s are holding around 26% stake in it with 6% held by mutual funds. Couple of weeks back, the company has hiked the FII limit to 74%, which indicates that FIIs are quite interested in this company. At a reasonable discounting by 12 times against its FY08 earning, its share price can once again test Rs.220 levels in 12-15 months.