Moneycontrol
Dec 02, 2016 03:43 PM IST | Source: Moneycontrol.com

Buy Balkrishna Industries; target of Rs 1231: Edelweiss

Edelweiss is bullish on Balkrishna Industries has recommended buy rating on the stock with a target price of Rs 1231 in its research report dated December 01, 2016.

 
 
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Edelweiss' research report on Balkrishna Industries


Balkrishna Industries’ (BKT) Q2FY17 result highlight was the strong 21% YoY spurt in volumes to 42,550MT (11% in Q1FY17). Revenues, at INR9.3bn (net of excise), was up 15% YoY as realisation corrected 5% YoY. Driven by strong gross margin expansion, EBITDA margin increased 130bps YoY to 33%. PAT surged 129% YoY to INR 2.4bn, aided by forex gain. Despite the growth, the company maintained its volume guidance of 160,000-170,000MT for FY17 with a margin guidance range of 28-32% (28-30% earlier). Factoring in the strong volume momentum and better margin expectations, we raise our FY17/18E EPS by 10%/11% and upgrade our multiple from 13.0x to 15.0x, driven by 17% volume CAGR over FY16-18E and opportunity in OTR market. This will drive a 521bps expansion in RoCE (323bps earlier). Also, utilisation at 68% in FY18E leaves further scope for growth without additional capex. Maintain ‘BUY’ with a revised TP of INR 1,231 (INR 958 earlier).


Factoring in strong volume momentum and better margin expectations, we raise our FY17/18E EPS by 10%/11%. We also upgrade our target multiple from 13.0x to 15.0x, driven by 17 % volume CAGR over FY16-18E and opportunity in OTR market. This will also drive 521bps expansion in RoCE (323bps earlier) over FY16-18E to 24.3%. Also, utilisation at 68% in FY18E leaves further scope for growth without additional capex. Maintain ‘BUY’ with TP of INR 1,231.

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