Dec 02, 2016 03:30 PM IST IST | Source:

Hold Balkrishna Industries; target of Rs 1216: KR Choksey

KR Choksey recommended hold rating on Balkrishna Industries with a target price of Rs 1216 in its research report dated December 02, 2016.

KR Choksey's research report on Balkrishna Industries

In Q2FY17, Balkrishna Industries Ltd (BKT) reported net sales of INR 9,326Mn which (was 5% lower than our estimate of INR 9,849 Mn) increased by 15.3% Y-o-Y and 0.5% Q-o-Q. BKT’s EBIDTA stood at INR 3,075Mn beating our estimate of INR 2,775Mn driven by margin expansion. BKT’s EBITDA margin improved by 130bps Y-o-Y and beat our estimate by 480bps. Company’s PAT stood at INR 2,430Mn which increased by 128.8% on Y-o-Y and 63% on Q-o-Q basis for Q2FY17 respectively.

Despite the challenging times in the global agriculture and mining segments, the company expects to grow faster than the industry due to gradual improvement in the replacement demand and rising traction from heavy machinery vehicles. BKT has significant cost & focus advantages in the OHT segment compared with peers which is reflected in margin advantage with peers. We believe adding new SKU’s and deepening its geographical reach BKT will witness significant top-line growth which will lead to increase in cash flow. At CMP of INR 1189, the stock is trading at 20.2x FY17E EPS of INR 58.9, 14.5x FY18E EPS of INR 81.8 respectively and 11.7x FY19E EPS of INR 101.3. We have valued the company at 12x FY19E EPS of INR 101.3, and rate “HOLD” factoring its growth story, limiting its further upside.

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