Reduce Balkrishna Industries; target of Rs 2528: KR Choksey

KR Choksey's research report on Balkrishna Industries

Company Q3FY25’s earnings performance exceeds our estimates across the board. For Q3FY25, BIL reported revenue of INR 25,603 Mn (+12.6% YoY/ +5.8% QoQ), which outperformed our estimates by 4.3%. In Q3FY25, EBITDA grew by 11.1% YoY/ (+3.6% QoQ) to INR 6,007 Mn, which is in line with our estimate. PAT for the quarter was INR 4,495 Mn (+47.2% YoY/ +29.6% QoQ), which beat our estimate mainly due to lower-than-expected depreciation and higher than expected other income. We maintain our FY26E/FY27E EPS estimates respectively, as we expect persistent weak demand in Europe, margin pressures from rising raw material costs, and near-term uncertainty in global macroeconomic conditions may impacted company’s future profitability. We expect Revenue/EBITDA/PAT to grow at a CAGR of 13.6%/ 15.0%/ 14.0% over FY24-FY27E.

Outlook

The stock is currently trading at 24.5x/22.7x our estimated EPS for FY26E/FY27E, respectively. We rollover our valuation multiple to FY27E and assign a P/E multiple of 22x (earlier 27x on FY26E EPS) on FY27E EPS of INR 112.0 (maintained), resulting in a target price of INR 2,528 (previously INR 2,768). Subsequently, we maintain our ‘REDUCE’ rating on the shares of Balkrishna Industries Ltd.

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