Balkrishna Industries Ltd. share price target

Q1FY18 adj. EBITDA was 7% below estimate owing to lower-than-expected gross margin. This was largely due to high-cost raw material inventory impacting margin while price hike (~5%) announced was not implemented fully.

Operating efficiencies to sustain margins: Balkrishna Industries Ltd (BKT)recorded revenue of Rs.10128Mn in Q1FY18, up by 7.5% YoY driven by a YoY7.0% volume growth. EBITDA stands at Rs. 2162Mn at 21.3% lesser by 411 bpsQoQ, as the natural rubber (which was procured earlier in Q4FY16 at a higher cost)had been utilized this quarter, thus leading to EBITDA margin contraction.

We maintain Neutral with an upgraded TP of Rs 1,654 (rolled forward to 15x Jun-19E EPS). Balkrishna Industries (BIL) top line at Rs 10.1bn (+9% YoY) was in-line with expectations, largely led by 7% volume growth and 2% growth in net ASPs. EBITDA margin (26%) came in below our expectations owing to lower gross margins. BIL enjoys significant cost (25-30% lower than peers) and product mix (OTR) advantages, and is thus able to generate high margins. Given the volatility in rubber prices, we believe these margins are not sustainable, despite a strong demand outlook in the global off-highway vehicle market.

ICICI Securities Ltd | Retail Equity Research Balkrishna Industries' (BIL) revenue came in at | 1013 crore (up 7.5% YoY) vs. estimate of | 1061 crore mainly after volumes grew 7% YoY to 46,327 metric tonnes (MT) (vs. estimate of 47,637 MT) EBITDA margin was at 21.3% (down 955 bps YoY & 411 bps QoQ). According to the management, partial rollback of price hikes taken in April 2017 & higher cost of NR inventory impacted margins Other income at | 92 crore (includes forex gains of | 58 crore)...

Revenue increased by 0.98% to Rs. 1012.77 Cr in Q1FY18 when compared to the previous quarter. Revenue increased by 0.98% to Rs. 1012.77 Cr in Q1FY18 when compared to the previous quarter.

Balkrishna Industries Limited is a leading manufacturer in the Off-Highway tyre market. It is focused on manufacturing a range of off-highway specialty tyres, which are used in agricultural, industrial, material handling, construction, earthmoving, forestry, lawn and garden equipment and all-terrain vehicles. The Company serves both original equipment manufacturers (OEM) and the replacement market. The company has four subsidiaries in Europe and North America and sells products in 130 countries worldwide. In India it has five production sites in Aurangabad,...

Balkrishna Industries' (BIL) revenues came in at | 1003 crore (up 15.2% YoY) vs. our estimate of | 998 crore. This was mainly after volumes grew 14.1% YoY to 46,149 metric tonnes (MT) EBITDA margins came in at 25.5% (up 41bps YoY but down 605 bps QoQ) vs. estimate of 28.9%. With higher input cost (average natural rubber prices were up 52.3% YoY & 22.5% QoQ to | 152/kg in Q4FY17) its gross margin contracted 636 bps YoY & 642 bps QoQ. Margins, however were partly supported by lower staff cost (down...

Balkrishna Industries (BIL) top line at Rs 10bn ( 15% YoY) was above expectations, largely led by the 9% beat on volumes and 3% growth in net ASPs. EBITDA margin (25.5%) came in below expectations (28.6%), owing higher price of natural rubber.

Background: Balkrishna Industries (BIL) is focused solely on 'off-highway' tyres catering to agricultural & industrial segments. A low ~5% share of the global market makes us believe reasonable room exists for several years of growth. While OTR forms ~65% of the global market, for BIL, it only contributes ~33% to its revenue. With the completion of the new 140,000 MT facility at Bhuj, BIL is looking to expand in the OEM, OTR segments. The company has been undertaking various actions like setting up warehouses in markets in North America and Europe to be closer to the customer and have a just in time (JIT) system. BIL is focusing on the OEM segment while its share in revenue has...

Background: Balkrishna Industries (BIL) is focused solely on 'off-highway' tyres catering to agricultural & industrial segments. A low ~5% share of the global market makes us believe reasonable room exists for several years of growth. While OTR forms ~65% of the global market, for BIL, it only contributes ~33% to its revenue. With the completion of the new 140,000 MT facility at Bhuj, BIL is looking to expand in the OEM, OTR segments. The company has been undertaking various actions like setting up warehouses in markets in North America and Europe to be closer to the customer and have a just in time (JIT) system. BIL is focusing on the OEM segment while its share in revenue has...