Deven Choksey's research report on Balkrishna Industries
Balkrishna Industries reported revenue stood at INR 27,524 Mn., up 2.6% YoY (+7.5% QoQ), in-line with our estimates (-2.0%). EBITDA stood at INR 6,135 Mn., up 9.9% YoY (+2.1% QoQ), sharply below our estimates (-16.8%) driven by sharp decline in gross margins partly offset by lower other expenses. Net profit stood at INR 3,686 Mn., down 24.3% YoY (-18.0% QoQ), sharply below our estimates (-25.5%), led by poor operational performance and, higher depreciation and finance cost. We have revised our FY26E/FY27E EPS estimates by -7.0%/-0.4% respectively, to factor in contraction in gross margins, persistent weaker demand across key European markets and, near-term macro uncertainties. Moreover, we believe that profitability will be adversely impacted in short-term led by gross margins impacted by elevated raw material costs and distorted cost structure driven by rising employee expenses and other expenses. We expect Revenue/EBITDA/PAT to grow at a CAGR of 13.9%/15.7%/14.6% over FY25-FY27E.
Outlook
The stock is currently trading at 25.6x/22.2x our estimated EPS for FY26E/FY27E, respectively. We value Balkrishna Industries at 22.0x FY27E EPS, implying a target price of INR 2,474. We reiterate our “REDUCE” rating on the stock.
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