⚡ At a Glance

LGB makes chains, sprockets, and transmission parts for India’s two-wheeler and automotive royalty. It’s almost debt-free, posts 20%+ ROCE, has grown profit at 30% CAGR in 5 years, and still trades at a P/E of just 14.5. So why does no one talk about this Chennai-based cash-flow machine?

1. 🧲 Introduction with Hook

You’ve heard of Uno Minda, Bharat Forge, and Schaeffler India. But what if we told you one of their quieter cousins is delivering better capital efficiency at one-third the valuation?

Meet L.G. Balakrishnan — auto component OG, cashflow king, and possibly the most under-owned, under-hyped, and undervalued auto ancillary stock out there.

But… does boring mean dependable? Or just sleepy?

2. 🏭 Business Model – WTF Do They Even Do?

🚴‍♂️ Transmission Division (79% of revenue)

• Chains, sprockets, tensioners, brake shoes
• Primarily for two-wheelers and light vehicles
• Supplies to top OEMs like TVS, Hero, Bajaj, Honda

🔩 Metal Forming (20%)

• Precision engineering: fine blanking, machined parts, hot/cold forging
• Serves CVs and PVs

🌱 Others (1%)

• Trading + Spares

This is the invisible backbone of the auto industry. They don’t make bikes—they make bikes move.

3. 📈 Financials – Profit, Margins, ROE, Growth

💥 Profit doubled in 3 years.
📉 Sales growth is just 7–10%.
🔁 Margins have improved despite flat revenue. Operational wizardry?

4. 💰 Valuation – Is It Cheap, Meh, or Crack?

At ₹1,291:

• P/E: 14.5
• P/B: 2.15
• ROCE: 20%
• ROE: 16%
• Dividend Yield: 1.37% (₹20/share FY25 declared)

📊 EduFV Range (Conservative)

• EPS range: ₹90–₹100
• Fair P/E: 15–18 (given capital efficiency + debt-free + high payout)

🧮 Fair Value = ₹1,350 – ₹1,800

Currently in the undervalued-but-boring zone. No “EV pivot”, no “hydrogen play”, no influencer buzz.

5. 🍿 What’s Cooking – News, Triggers, Drama

• 🛵 Two-wheeler sales up → direct beneficiary
• 🏍️ Export traction in sprockets and chains
• 💰 Declared ₹20/share dividend for FY25
• 🔍 Low float + smallcap → not on FII/DII radar
• 📈 EPS of ₹26.35 in Q4FY25 → record high!

Upcoming Trigger:
🎯 Board meeting on July 31 for Q1 FY26—expectations running high after a blockbuster FY25.

6. 📉 Balance Sheet – How Much Debt, How Many Dreams?

👑 Debt has remained flat, but equity has more than doubled.

This is what compounding profits + zero dilution looks like.

7. 💵 Cash Flow – Sab Number Game Hai

🚧 Capex is catching up with growth.

Still, with zero dilution, high payout, and cash-rich operations, LGB feels like a Maruti supplier with a D-Mart discipline.

8. 📐 Ratios – Sexy or Stressy?

🎯 Extremely stable metrics.
📉 No surprises, no shocks.

9. 💸 P&L Breakdown – Show Me the Money

Q4 FY25:

• Sales: ₹669 Cr
• Operating Profit: ₹102 Cr (15.2%)
• PAT: ₹84 Cr
• EPS: ₹26.35 (highest ever)

Previous 3 quarters were ₹75, ₹75, and ₹78 Cr PAT.

🎯 Consistency = boring = perfect for SIP-style investing.

10. 🤝 Peer Comparison – Who Else in the Game?

🏁 Cheapest among the efficient. But no hype.

11. 📋 Miscellaneous – Shareholding, Promoters

• 👨‍👩‍👧‍👦 Promoters: 34.8%
• 📉 FIIs: 5.9% (declining)
• 📈 DIIs: 13.8%
• 🙋‍♂️ Public: 45.4%
• 🧾 No major pledges, no drama

👀 Over 37,000 retail holders—but still low institutional interest due to market cap <₹5,000 Cr.

12. 🧑‍⚖️ EduInvesting Verdict™

L.G. Balakrishnan is the finance bro of auto components: doesn’t brag, doesn’t spike, but compounds 16%–20% year after year.

✅ Near debt-free
✅ Consistent ROE & ROCE
✅ Reasonable dividend
✅ High cash flow quality
❌ Sluggish topline growth
❌ Low promoter holding
❌ No “story” to excite the market

But if you like low beta, high return, predictable cash machines—this one’s already been delivering for a decade.

💸 Fair Value Range: ₹1,350 – ₹1,800

And that’s without the hype. Add a few investor meets and this could easily re-rate.

✍️ Written by Prashant | 📅 July 7, 2025
Tags: LG Balakrishnan, Auto Ancillary, Two-Wheeler Suppliers, Chains and Sprockets, Value Stocks, Smallcap Auto, ROCE Leaders, Dividend Stocks