BRICS PCG puts 'Buy' on Lloyd Electric

Lloyd Electric and Engineering's (LEEL) recorded a net profit of Rs 29.45 crore on revenues of Rs 3,52.7 crore in FY 2006. The net profit was bolstered by higher other income (arising from a large cash and bank balance).

At the current price of Rs 188, LEEL is trading at 10.6x its FY07 diluted earnings of Rs 17.9 per share and 2.1x its FY06 book value per share of Rs 81.4.

In view of the company's leading position in the manufacture of evaporator and condenser coils and the cost advantage it enjoys in assembling ACs, LEEL will stand to benefit immensely from the growth in the AC industry.

It is believed that LEEL deserves a valuation equivalent to that assigned to AC manufacturers since its prospects and profitability are directly related to that of AC manufacturers and thus the AC industry.

The company is currently undervalued vis-a-vis peers like Voltas and Blue Star. Therefore, the stock is recommended with a target price of Rs 297.