KRChoksey is bullish on Balkrishna Industries and has recommended accumulate rating on the stock with a target of Rs 610 in its May 21, 2014 research report.
"BIL reported Net sales of Rs.1036crs up by 33 percent y-o-y basis and by 17 percent on q-o-q basis on the back of increase in volumes by 21 percent on both y-o-y and q-o-q basis. EBITDA was up by 72 percent y-o-y & by 17 percent q-o-q to Rs.268crs on the account of decrease in Rubber prices. EBIDTA Margins improved by 583bps y-o-y to 25.8 percent. Net profit jumped up by 82 percent y-o-y & by 25 percent on q-o-q basis to Rs.154crs. PAT margins improved by 401bps on y-o-y and by 86bps on q-o-q basis on the back of overall improvement in operating margins."
"BIL reported Net Revenue of Rs.1036crs up by 33 percent than same quarter last year on the back of increase in volume sales up by 21 percent and higher realization up by 11 percent. Better realization on y-o-y basis was mainly on account of higher currency exchange rate. On q-o-q basis sales increased by 17 percent mainly on account of volume growth of 21 percent which was offset by marginal degrowth in realization (down by 1.7 percent). EBITDA for the quarter was Rs.268crs which expanded by 72 percent on y-o-y and by 17 percent on q-o-q basis. Softening in rubber price than last year along with better volume and realization growth led to higher margin expansion. percent of Raw material cost to sales came down to 46.7 percent from 54.8 percent last year which resulted into EBITDA margin expansion by 583bps to 25.8 percent. Rubber prices remained at $2200 to $2300 per tonne as against $3000 level in the last year. Sequentially EBITDA grew by 17 percent and margin was flat."
"We expect the BIL's volumes to improve going forward on the back of recovery in the US economy coupled with consistent demand from Europe. This along with increasing share of OEM in to the overall sales mix will help the company to achieve volumes of 165000 tonnes in FY15. The increase in the capacity at its BHUJ facility gives the company additional cushions to go aggressive on acquiring more of OEM business. Moreover replacement market is doing well and increase in sale of OHT tyres which is higher margin business will help to maintain or expand margin going further. We expect the profits of the company to grow by 25 percent CAGR from 2014-2016. At the CMP of Rs.567 per share, BIL is trading at a PE of 9.3xFY15E & 7.9xFY16E. We maintain our "ACCUMULATE" rating on the stock with a target price at Rs.610, an upside of 8 percent," says KRChoksey research report.
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