Balkrishna Industries Ltd - Q1 FY14 - Asit C. Mehta

Balkrishna Industries Ltd (BIL) recorded net sales for Q1FY14 of Rs. 816 crore, down 1% YoY due to slowdown in demand in Europe and North America. The company's sales volume declined 6% YoY to 34941 MT from 37000 MT in Q1FY13. However, volume had increased 2.5% on sequential basis. Despite revenues moving down, the company's EBIDTA for the quarter came in at Rs. 179 crore, showing a strong growth of 14%/15% on YoY/QoQ basis. EBIDTA margin jumped to 21.9%, up 277/190 bps on YoY/QoQ basis mainly due to softening in raw material prices. The PAT came in at Rs. 102 crore, up 40%/21% on YoY/QoQ basis (mainly on other income Rs. 17 crore vs. Rs. 1.1 crore in Q1FY13).

Outlook

Although the company may experience short-term weakness in demand, we are optimistic on the company's long-term prospects. We expect the outlook ahead to brighten, as the company continues to expand its market reach with its strong global, well-diversified distributor network and the expectation on improvement in demand.

Valuation

At the CMP of Rs. 212, the stock is trading at 5.43x its TTM EPS of Rs. 38.66. We assign a multiple of 6x FY14E EPS of Rs. 42 to arrive at a target price of Rs. 252. Therefore, we retain our 'ACCUMULATE' rating to the stock at current levels.

Source : Equity Bulls

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