ICICI Direct is bullish on Balkrishna Industries has recommended buy rating on the stock with a target price of Rs 1450 in its research report dated June 23, 2020.
ICICI Direct's research report on Balkrishna Industries
Balkrishna Industries (BIL) posted healthy Q4FY20 results. Standalone revenue for the quarter came in at Rs 1,357 crore (up 0.5% YoY), on the back of 4.7% rise in volumes to 57,966 MT. Margins declined 198 bps sequentially to 27.4% on account of 329 bps gross margin deterioration (largely led by year-end inventory adjustments), even as employee costs and other expenses declined 54 bps and 77 bps, respectively. Consequent PAT came in at Rs 257.3 crore (up 39.3% YoY), tracking a rise in margins on a yearly basis, an increase in other income and decline in tax outgo. BIL commissioned Phase II of carbon black plant (80,000 MT) during Q4FY20.
Outlook
BIL’s structural margin accretive efforts along with expected resilience in volumes and long term debt free B/S and healthy cash flow generation merit significant premium in valuations over peers, in our view. With bulk of capex slated to be complete in FY21E, BIL will generate healthy FCF in FY22E. Hence, we upgrade BIL from HOLD to BUY with a revised target price of Rs 1,450, valuing it at 25x FY22E EPS of Rs 58.2.
For all recommendations report, click here
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