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Wednesday, 22 February 2017


BALKRISHNA Industries Ltd reported strong December quarter with PAT & EBDITA rising in double digits at 94% & 77% respectively YOY.  PAT stood at Rs. 1857 Mn against Rs.956 Mn corresponding period previous year. Revenue was seen at Rs. 8968 Mn rising 26% YOY and stood at Rs. 7114 Mn in Q3 FY16. EBDITA followed suit rising 1.7 times and was reported at Rs. 3064 Mn in Q3 FY17 against Rs. 1727 Mn corresponding quarter previous year. Profit Before tax at Rs. 2574 Mn almost doubled on yearly basis as forex gain of Rs.345 Mn was reported in the current December quarter. Other Income too played it’s part trebling YOY buttressing company’s bottom-line in the current quarter. Other Income was reported at Rs. 285 Mn compared to Rs. 102 Mn in same quarter previous year. Higher volume growth, controlled cost structure, reduced finance costs have led to phenomenal growth for both EBDITA & Net Profit Margins. EBDITA Margin jumped 989 bp whereas Net Profit Margin improved 726 basis points YOY. One basis point is 1/100th of a percentage. EBDIA & Net Profit Margin stood at 34.17% & 20.71% in the current December quarter. The company is also focused on deleveraging itself and interest costs have been declining over the previous 4-5 quarters. Last but not least, the company has reported 22% volume growth at 40415 MT in the current quarter compared to 33010 MT same period previous year.

Balkrishna Industries Ltd (BKT) with market cap of Rs. 114047 Mn has more than 85% of its earnings dependent on exports.   The company has performed in the backdrop 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 current cash holdings of about Rs.11930 Mn in Q3 FY17. We recommend BUY for the stock for medium & long term investment with PE multiple of 14.89 x FY17E & 13.60 x FY18E with a target price of Rs. 1320.

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