BALKRISHNA INDUSTRIES LTD - Q2 FY18

BALKRISHNA Industries Ltd, India’s largest ‘Off Highway Tire Manufacturer’ reported strong sequential growth though yearly numbers were subdued. Revenue jumped 18% YOY at Rs. 11144 Mn against Rs. 9455 Mn same period previous year with sequential growth of 10% in the current September quarter.  PAT stood at Rs.2030 Mn against Rs.2429 Mn corresponding period previous year declining 16% YOY but with sequential growth of 33%. The company reported highest ever quarterly volume growth of 16% YOY at 49331 MT in the current September quarter. EBDITA declined 6% YOY and was reported at Rs. 3874 Mn in Q2 FY18 against Rs. 4110 Mn corresponding quarter previous year. On quarterly basis, EBDITA jumped 26% as operating expenditure exhibited mild uptick of 2% in Q2 FY18. Operating expenditure YOY rose 27% from Rs. 6381 Mn in Q2 FY17 to Rs. 8096 Mn in the current September quarter. As a result Margins deteriorated YOY whereas healthy growth was reported on quarterly basis.  EBDITA Margin declined 871 bp YOY and jumped 430 bp sequentially. Net Profit too presented a similar picture, rising 309 bp QOQ and declining 748 bp on yearly basis. One basis point is 1/100^th of a percentage. EBDITA & Net Profit Margin stood at 34.76% & 18.21% in the current quarter compared to 43.47% & 25.69% respectively same period previous year. Profit Before tax was reported at Rs. 3071 Mn in the current quarter vis-a vis Rs.3338 Mn in Q2 FY17. Other Income declined 20% YOY at Rs. 825 Mn in the current September quarter. The company continued its deleveraging exercise and interest costs have been further pruned by 45% on yearly basis.

 Balkrishna Industries Ltd (BKT) is India’s leading global, ‘Off Highway Tire’ player catering to 130 countries through distribution network in Americas, Europe, India and Rest Of the World. BKT with market cap of Rs. 201412 Mn has more than 85% of its earnings dependent on exports. The company has performed in the backdrop of slow global growth and high currency fluctuations. In addition to that BKT is also focused on rationalizing its debt burden by utilizing its high cash holdings.  The company has repaid long term debt of around Rs. 2170 Mn in Q2 FY18.  Current cash holdings stand at Rs. 10660 Mn. We recommend BUY for the stock for medium & long term investment with target price of Rs. 2420. 

Disclaimer                                       

                                      

The information and opinions contained in the research reports have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. The research report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including but not limited to tax advice. The reports do not take into account the particular investment objectives, financial situations, risk profile or needs of individual clients. The user assumes the entire risk of any use made of this information. This report is not to be relied upon in substitution for the exercise of independent judgment.

The price and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.

Research data and reports published/ emailed/ text messaged via Short Messaging Services, Online Messengers, WhatsApp etc/transmitted through mobile application/s, including but not limited to FLIP™, Video Widget, telephony networks, print or electronic media and or those made available/uploaded on social networking sites (e.g. Facebook, Twitter, LinkedIn etc) is for informational purposes only. The reports are provided for assistance and are not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Though disseminated to clients simultaneously, not all clients may receive the reports at the same time. We will not treat recipients as clients by virtue of their receiving this report.

The reports include projections, forecasts and other predictive statements which represent our assumptions and expectations in the light of currently available information. These projections and forecasts are based on industry trends, circumstances and factors which involve risks, variables and uncertainties. The actual performance of the companies represented in the report may vary from those projected.

The opinions expressed in the reports are subject to change but we have no obligation to tell our clients when our opinions or recommendations change. The reports are non-inclusive and do not consider all the information that the recipients may consider material to investments.

We shall not be in any way responsible for any indirect, special or consequential damages that may arise to any person from any inadvertent error in the information contained in the reports nor do they take guarantee or assume liability for any omissions of the information contained therein. Information contained therein cannot be the basis for any claim, demand or cause of action. These data, reports and information do not constitute scientific publication and do not carry any evidentiary value whatsoever.

The user should consult their own advisors to determine the merits and risks of investment and also read the Risk Disclosure Documents for Capital Markets and Derivative Segments as prescribed by Securities and Exchange Board of India before investing in the Indian Markets. The securities discussed in this report may not be suitable for all investors. Investors must make their own investment decision based on their own investment objectives, goals and financial position and based on their own analysis. Prospective investors and others are cautioned that any forward-looking statements, if any, are not predictions and may be subject to change without notice.

This report may provide the addresses of, or contain hyperlinks to websites. Except to the extent to which the report refers to material we take no responsibility whatsoever for the contents therein. Such addresses or hyperlinks are provided solely for your convenience and information and the content of the linked site does not in any way form part of this report. Accessing such website or following such link through this report shall be at your own risk.

The author of this Research Report accepts no liability and will not in any way be responsible for the contents of this report or for any losses, costs, expenses, charges, including notional losses/lost opportunities incurred by a recipient as a result of acting or non-acting on any information/material contained in the report. This is not an offer to sell or a solicitation to buy any securities or an attempt to influence the opinion or behavior of investors or recipients or provide any investment/tax advice. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.