ICICI Direct recommended hold rating on Balkrishna Industries with a target price of Rs 1025 in its research report dated November 09, 2018.
ICICI Direct's research report on Balkrishna Industries
Balkrishna Industries’ (BIL) revenues grew 18.9% YoY to Rs 1,325 crore (vs. estimate of Rs 1,424 crore). Volumes grew 6.1% YoY to 52,339 metric tonnes (MT) (vs. expectation of 56,237 MT) EBITDA increased 9.1% YoY to Rs 333 crore vs. our expectation of Rs 411 crore. EBITDA margins came in at 25.1% (down 226 bps YoY & 115 bps QoQ) below our estimate of 28.8%, mainly due to higher other expense that increased 548 bps YoY & 167 bps QoQ Reported PAT came in at Rs 222 crore (up 9.5% YoY) vs. our estimate of Rs 262 crore. It declared an interim dividend of Rs 2/share BIL has revised its volume guidance downward in range of 210,000 MT to 220,000 MT (vs. earlier guidance of 225,000 MT to 230,000 MT) for FY19E. This was mainly on account of a drought in Europe & weak monsoons in other geographies, which impacted the agriculture space along with the ongoing trade war across the globe.
Outlook
Furthermore, with its close peer looking for a major expansion, the competition intensity will heat up in the OHT space thereby creating overhang on BIL. Hence we reduce our valuation multiple, valuing 17x P/E on FY20E EPS of Rs 59.7 with a target price of Rs 1025. We maintain HOLD rating on the stock.
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