Balkrishna Industries - Volume & forex gains drive superlative yoy growth; maintain BUY - BRICS

BIL's Q2FY13 results were ahead of the Street's estimates - driven by higher volume (up 15% yoy) and realization (up 16% yoy). Revenue came in at Rs8,871mn, up 33% yoy. EBITDA grew significantly by 60% yoy to Rs1,872mn, aided by lower raw material cost, which resulted in expansion of 357bps yoy in EBIDTA margin to 21%. Adjusted PAT grew 42% yoy to Rs978mn and reported PAT (including forex adjustments) was up 96% yoy to Rs1,237mn. The company commenced production at its Bhuj plant in August 2012, which is expected to aid its overall volume growth. BIL has arranged a conference call on November 20, 2012, after which, we will be releasing a separate update. We maintain our rating of Buy on BIL and target price of Rs356.

Revenue up 33% yoy, driven by both volume and realisation: Revenue grew 33% yoy and 8% qoq to Rs8,871mn. Volume was up 15% yoy (flat qoq) to 37,152MT and realization improved by 16% yoy and 8% qoq to Rs238,776 per MT. The agriculture segment contributed 63% in H1, while OTR and others contributed 34% and 5%. BIL currently has an order book for 32,000MT, which is equivalent to 2.5 months of revenue. The Bhuj plant has commenced production and is likely to aid BIL's overall volume growth in FY13 and FY14.

EBIDTA margin expands by 357bps yoy to 21%: Raw material to net sales fell 627bps yoy, due to a change in mix and higher realization. Despite an increase of 237bps yoy in other expenses, EBITDA margin expanded by 357bps yoy and 197bps qoq to 21%. EBITDA rose 60% yoy and 19% qoq to Rs1,872mn.

Adjusted PAT up 42% yoy: Interest cost rose 37% yoy, on account of higher borrowings. Tax rate was up 38% yoy due to higher deferred tax in Q2. Adjusted PAT grew 42% yoy to Rs978mn and reported PAT was up 96% yoy to Rs1,237mn, due to forex gains of Rs259mn.

Maintain Buy rating and target price of Rs356

The stock trades at 7.6x FY13E and 6.0x FY14E and an EV/EBITDA of 7.2x FY13E and 5.7x FY14E. We expect BIL's revenue and earnings to grow at a CAGR of 24% and 29% over FY12-14E. We value BIL at Rs356, based on the DCF method. At our target price of Rs356, the stock will trade at 10x FY13E and 8x FY14E.

Source : Equity Bulls

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