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Q u a l i t y c o m e s f i r s t …
Balkrishna Industries (BIL) posted its Q1FY12 numbers, which were above
our estimates. BIL reported a topline of | 581.4 crore (I-direct estimate: |
566.7 crore) reflecting 27.5% YoY growth driven by higher tonnage sales
(up ~7.9% YoY) at 28,720 MT. During the quarter, BIL had undertaken a
price hike to the tune of 5-7%, which served as a buffer to margins with
realisation improving ~18% YoY. The EBITDA margin declined 189 bps
YoY but rose 203 bps QoQ to touch 18% driven mainly by lower other
expenses (down 36.5% QoQ). The recipe cost for rubber has moved up to
~$4.7/kg with the management expecting prices to moderate or stay at
similar levels, going forward. The inventory hedge has been reduced to
two months from six months as falling rubber prices would present an
opportunity for margin expansion. PAT jumped 26.5% YoY to | 56.1 crore
(I-direct estimate: | 49.2 crore).
Highlights of the quarter
BIL had clocked volume growth of ~32% for FY11 at 111,545 MT and has
recorded 28,720 MT sales for Q1FY12 (up ~8% YoY). With the brownfield
expansion to be completed by September 2011, the production capacity
would reach 140,000 MTPA. Sales continue to be driven by the US and
European regions with each contributing ~23%, ~50% on a volume basis.
The company is benefiting from diversifying to various geographies like
South & Central America, Middle East and CIS nations. BIL continues to
gain higher market share from its competitors (Bridgestone, Michelin) with
pricing differential of ~30%. The greenfield expansion in Bhuj would be
completed by Q2FY13 and raise achievable capacity to 230,000 MT. BIL
continues to hedge its receivables and payables by fixing the order book
rates and input costs to provide margin consistency.
V a l u a t i o n
Strong revenue outlook backed by relatively inelastic demand along with
geographic diversification makes BIL an attractive play in comparison to its
peers. BIL continues to enjoy pricing advantage over its global peers and
has a robust order book of ~| 1300 crore. At the CMP of | 161, the stock is
trading at 6.8x FY12E EPS of | 23.7 and 5.8x FY13E EPS of | 27.9. We
value the stock at 7x FY13EPS of | 27.9 to arrive at a target price of | 195
with an upside potential of 21%. We maintain our BUY rating on BIL.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Q u a l i t y c o m e s f i r s t …
Balkrishna Industries (BIL) posted its Q1FY12 numbers, which were above
our estimates. BIL reported a topline of | 581.4 crore (I-direct estimate: |
566.7 crore) reflecting 27.5% YoY growth driven by higher tonnage sales
(up ~7.9% YoY) at 28,720 MT. During the quarter, BIL had undertaken a
price hike to the tune of 5-7%, which served as a buffer to margins with
realisation improving ~18% YoY. The EBITDA margin declined 189 bps
YoY but rose 203 bps QoQ to touch 18% driven mainly by lower other
expenses (down 36.5% QoQ). The recipe cost for rubber has moved up to
~$4.7/kg with the management expecting prices to moderate or stay at
similar levels, going forward. The inventory hedge has been reduced to
two months from six months as falling rubber prices would present an
opportunity for margin expansion. PAT jumped 26.5% YoY to | 56.1 crore
(I-direct estimate: | 49.2 crore).
Highlights of the quarter
BIL had clocked volume growth of ~32% for FY11 at 111,545 MT and has
recorded 28,720 MT sales for Q1FY12 (up ~8% YoY). With the brownfield
expansion to be completed by September 2011, the production capacity
would reach 140,000 MTPA. Sales continue to be driven by the US and
European regions with each contributing ~23%, ~50% on a volume basis.
The company is benefiting from diversifying to various geographies like
South & Central America, Middle East and CIS nations. BIL continues to
gain higher market share from its competitors (Bridgestone, Michelin) with
pricing differential of ~30%. The greenfield expansion in Bhuj would be
completed by Q2FY13 and raise achievable capacity to 230,000 MT. BIL
continues to hedge its receivables and payables by fixing the order book
rates and input costs to provide margin consistency.
V a l u a t i o n
Strong revenue outlook backed by relatively inelastic demand along with
geographic diversification makes BIL an attractive play in comparison to its
peers. BIL continues to enjoy pricing advantage over its global peers and
has a robust order book of ~| 1300 crore. At the CMP of | 161, the stock is
trading at 6.8x FY12E EPS of | 23.7 and 5.8x FY13E EPS of | 27.9. We
value the stock at 7x FY13EPS of | 27.9 to arrive at a target price of | 195
with an upside potential of 21%. We maintain our BUY rating on BIL.
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