ICICI Direct's research report on Balkrishna Industries
Balkrishna Industries (BIL) reported healthy Q1FY21 results under the circumstances. Decline in standalone revenues was limited to 22.2% YoY (Rs 929 crore), tracking 25.7% decline in total tonnage to 38,096 MT during the Covid impacted quarter. Encouragingly, the company expects to close FY21E with similar volume levels as FY20 (~2 lakh MT). EBITDA in Q1FY21 was at Rs 230.6 crore, down 13.9% YoY, 38.1% QoQ. Margins fell 262 bps QoQ to 24.8%. QoQ decline in margin performance was on account of negative operating leverage although gross margins recorded a strong 511 bps expansion. Consequent PAT came in at Rs 121.7 crore (down 30.8% YoY). BIL declared an interim dividend of Rs 3/share.
Sales, PAT are expected to clock 8.8%, 8.4% CAGR, respectively, in FY20-22E. Healthy demand traction along with expected elevation of margin trajectory, long term debt free B/S and healthy cash flow generation makes us maintain our BUY recommendation on the stock with a revised target price of Rs 1,500 i.e. 26x FY22E EPS of Rs 57.5.
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