MY PSU Pick - Part II

Company Snapshot: 
Balmer Lawrie & Company Ltd. (BLCL) was established in 1867 by George Stephen Balmer and Alexander Lawrie at Kolkata. It became a public company in 1936 and a government owned company in 1972. It was assigned ‘Mini Ratna I’ status by government of India in 2006. 

BLCL operates in a diverse range of business (across India) areas as a manufacturer and service provider. The Company produces industrial packaging products, greases and lubricants, performance chemicals and marine freight containers. Services include tea exporting and trading, project engineering and consultancy and travel, tours and cargo. 

Thesis: 
The basis of selecting this company is based on expected good earnings visibility, high ROE, high cash reserves, and investments. 

Financial Snapshot:  
3 year Sales Growth of over 50%. 
Net Profit Growth for the same period of over 25%. 
Dividend Growth of over 30%.  
Total Assets growth of over 17%.  
Shareholders Equity Growth of over 17% (Rs.4.9 million – 2009) 
Current Book Value Rs. 304, 1yr BV change 19.81% 

Ratios: 
P/E= 7.58x; 

P/BV= 1.66x; 
P/CF= 4.21x; 
P/FCF= 7.73x

Div Payout Ratio = 30% (don't get confused with Div Growth Rate, as both are same) 
Div Coverage = 3.28x
ROE= 23.95%; ROA= 9.66%; RoCE= 20.62% 
Debts to Assets = 12.12%

Recommendation:

Constant generator of FCF over the years – a healthy sigh.

The current EV to Market Cap is just 0.83x.

The company could benefit if GoI undertakes disinvestment process.

Investment in this company with a 12-18 months time horizon is likely to deliver return between 25-35%.