Buy Balkrishna Industries; target of Rs 218: Way2Wealth

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Buy Balkrishna Industries; target of Rs 218: Way2Wealth

Way2Wealth is bullish on Balkrishna Industries and has recommended buy rating on the stock with a target of Rs 218 in its January 19, 2012 research report.

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Way2Wealth is bullish on Balkrishna Industries and has recommended buy rating on the stock with a target of Rs 218 in its January 19, 2012 research report.

"Balkrishna Industries (BIL) is a Niche Play in the Off-Highway Tyre (OHT) Segment. It is irrelative to Domestic Tyre Plays with a Global Market Share of 4% and Exports of 90%. On the back of a strong business model and price advantage we expect it to show a revenue growth of 15% CAGR from FY11-FY13E on the back of a 9% CAGR Volume (MT) and Realisation (Rs/MT) growth of 6% CAGR."

"BIL is leveraging on its low cost structural model amidst an environment of raw material contraction. It is well positioned to capture the existing OTR market pie of $11bn - $12bn, which is steadily growing @3%-4% CAGR. BIL's Greenfield Expansion of 90k MT at Bhuj, Gujarat is on track and would be complete by Q2FY13. As nature of Industry is 'Low Volume & High Variety' we expect 18k MT to be added in FY12 & 30k MT in FY13. Rubber Prices (RSS-3) doubled from Q4FY10 - Q4FY11, touching a peak of $649/Kg. Recently, it cooled off by >40% and is likely to remain on the lower side as Supply>Demand. The company maintains an Inventory of 2 months and hedges its future requirements. We expect raw material savings of 200bps in FY12 and 10bps in FY13, taking its EBIDTA Margin above its 4 Year Mean Level of 21%."

"BIL quotes at a 40% discount to its Direct Global Peer Titan International. The Mean P/E Multiple has been 7.5x for the company. Strong Business Model, Revenue Visibility (70k MT orderbook) & Improving ROE has propelled us to advise 'BIL' to our Investors with a allotted multiple of 6x. At the CMP of Rs 173, the stock discounts its FY12E/FY13E SA earnings of Rs30.6/Rs35.2 by a multiple of 5.6x/4.9 resp. Supplementing its FY13E earnings would be its Subsidiary earnings of Rs1.1, resulting into FY13E earnings of Rs36.3 for the company. We recommend Investors a 'BUY' with an Upside of 26%," says Way2Wealth research report.     

Non-Institutions holding more than 90% in Indian cos

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To read the full report click on the attachment