Lloyd Electric & Engineering Ltd is a prominent brand in the consumer durable business and a leading player in the heating, ventilation, air conditioning and refrigeration industry. The company has manufacturing facilities in Bhiwadi (Rajasthan) and in Kala Amb (Himachal Pradesh). The consumer market is poised for tremendous growth, with India expected to become the fifth largest consumer market in the world by 2025 and with production expected to touch US $400 billion.
Lloyd Electric posted an impressive performance for Q1FY17, with income in the consumer durable segment growing by 26% at Rs 893 crore, while profit after tax grew by 29% to Rs 44 crore. The increase in revenue was primarily a result of increased consumer demand for the Lloyd brand in the room AC segment. This resulted in the company enjoying a market share of around 14% and putting it among the top four players in the Indian room AC market. The growth was also attained on the back of increase in market share in the LED TV segment. Likewise, there was marked improvement in revenue in the Railway HVAC business, contributing to substantial growth numbers. Lloyd Electric has also acquired 100% assets relating to the rail and vehicle businesses of Noske Kaeser group companies in Germany, US, Brazil, New Zealand and Australia. By acquiring exclusive worldwide rights to use the trademark, Lloyd Electric can achieve a strategic objective of enhancing the company’s market position in the global rail and defence businesses. It will also offer superior quality HVAC solutions for the upcoming high speed rail projects. Many analysts are betting on those segment players which have a large valuation gap between the leaders and other smaller players, but provide an opportunity for higher stock returns generated by the smaller company. Traditionally, segment leaders trade at a premium and hence Lloyd Electric is an attractive bet where it can close the valuation gap due to consistency and superior performance. The industry PE for a home appliance company is around 40, whereas Lloyd Electric PE ratio is only 16. Hence, there is tremendous scope of appreciation for the stock to double from the present level of Rs 255 in 18 months.
A particular stock to look out for next week for traders would be pharma major Cipla Ltd. The firm has recently received US FDA approval for a particular drug and this positive news could propel the stock higher from the present level of Rs 575 for immediate gains.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.