Balkrishna Ind - Result Analysis Q1 FY21

Balkrishna Ind - Result Analysis Q1 FY21

CMP: 1,347 (As on 14-08-2020)

Total income from operations 942.6 Cr 

1,199 Cr (-21.41%) YoY | 1,372 Cr (-31.28%) QoQ 

Year ending revenue: 4,811 Cr Vs. 5,210 Cr (-7.61%)

Net Profit of 131.5 Cr 

176.9 Cr (-24.41%) YoY 264.7 Cr (-50.33%) QoQ 

Year ending Net profit: 959.7 Cr Vs. 774 Cr (23.94%)

EPS (in Rs.) 6.81

9.15 YoY | 13.69 QoQ 

Year ending EPS: 49.64 Vs. 40.02

View: Result is overall good and fair. YoY and QoQ revenue declined and profit also declined but pickup in sales volumes in May and June. 

Business Updates & Highlights:

Q1FY21 standalone EBITDA was around INR 251 Cr Vs. 296 Cr in Q1FY20 therefore declined by 15.2% in YoY. EBITDA margin in Q1FY21 was 26.7% Vs. 24.3% in Q1FY20. Increased in EBITDA margin by 240 bps. 

Sales Volumes 38,096 MT for Q1FY21. The pickup in sales volumes in May and June led to a total sales volume of 38,096 MT in Q1FY21. The monthly run rate is gaining momentum and is very visible in July and August.

Capex Updates

Replacement of Waluj Plant New state of the art fully integrated facility at a capex of approximately Rs. 500 crores to replace a very old existing plant to enhance productivity.

Capex at Bhuj Plant Upscaling to large sized All steel radial OTR Tires by investing in new capacity of 5,000 MT p.a. Additionally building Warehouse and Mixing Plant at Bhuj in Gujarat. Total capex of up to Rs. 500 crores.

Board of Directors have declared an Interim Dividend of Rs. 3 per equity share

Financial

ROE and ROCE is around 17% and 17% respectively and book value per share is around INR 260 and share is currently trading at 5.3x of its book value. Company is currently trading at annualized PE of around 33 which is fair as per Industry benchmark. Promoter holding in the company is around 58.3% which is strong and stable. FIIs and mutual fund hold around 13% and 17.6% respectively which is increased by FIIs in this quarter by 1%. Cash and Cash equivalents of Rs. 1,086 Cr as of June 2020. 

Position: Share strong support price is INR 1310/1240. Long term investor should continue with the company and any correction will give good opportunity to enter in SIP basis in long term.

Share View: Share price high 1,396 (52 week) and now 1,384. BIL mainly manufactures OHTs that are used in vehicles meant for agricultural, industrial, construction, and earth-moving purposes. Achievable capacity of its plant in Waluj is 40,000 tonne per annum (tpa), and in Bhiwadi and Chopanki (both in Rajasthan) 60,000 tpa each. Capacity of 140,000 tpa added in Bhuj was commissioned in fiscal 2016. The company has a wide product profile and sells in more than 130 countries

Opportunities

BKT is India’s Leading player in the Global ‘Off Highway Tire (OHT)’ Market. The demand is strong in Agriculture segment across Geographies and potential of this segment as well as the brand positioning of BKT in end markets which is continuously helping to gain market share. The Non-Agriculture segment is moving slow, on-account of low commodity prices and end user demand however company expect gradual uptick as economic activity increases across the globe. Manufacturing OHT is a labour-intensive process and the company benefits from presence in low-cost locations leading to strong operating efficiency. As employee cost is lower than that of most global peers, BIL's products are more competitively priced. Market share in the international OHT segment has increased steadily over the years to 5-6% currently, backed by association with major global original equipment manufacturers. Achievable capacities of 300,000 M.T.P.A. Capacity expansions is also on track. Diversified Product Portfolio, spread across Agriculture, Industrial, Construction and mining tires. Cash accrual is sufficient, capital structure strong, and debt protection metrics adequate. Healthy profitability and low interest cost will, likely, keep the metrics stable over the medium term. The company has repaid its long term debt and virtually debt free. 

Risk

Prices of key raw material, natural and synthetic rubber (raw materials account for 65% of BIL's aggregate production cost), tend to be volatile as they depend on global demand, area under cultivation, and crude oil prices. Consequently, profitability is volatile too. Around 75% of the raw material is imported so exposing BIL to the risk of sharp fluctuations in forex rate. Topline growth in last 5 year was single digit and less than 5%. 

Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.

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