Belrise Industries shares soar 6% as Investec initiates coverage with 'Buy' rating

Shares of Belrise Industries rallied as much as 6.4% to their day’s high of Rs 154.30 on the BSE on Wednesday, September 17, after brokerage firm Investec initiated coverage with a Buy rating and a price target of Rs 185. Analysts forecast an upside potential of 27.5% from the last close of Rs 145 per share.

Belrise, a 2W-focused auto ancillary with largely engine-agnostic products, is well placed for growth as it expands its OEM ties, rolls out new products and improves average selling prices through premiumization, Investec said in a note dated September 16. “The company’s 4W business too should see a significant step-up on the back of a strong order book, improved tech capabilities (H-One acquisition), and entry into Japanese OEMs and Maruti,” the note added.

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The brokerage forecasts the company’s four-wheeler revenue share to increase to 14% by FY28, broadening its total addressable market and spurring a likely valuation re-rating. We expect Belrise to deliver 30% PAT CAGR over FY25-28E, as operating performance will be amplified by de-leveraging,” the note added.

Analysts acknowledged that Belrise Industries’ current group structure is complex, involving multiple promoter-owned entities. However, the management plans to simplify this structure by merging all these entities. “Such a consolidation we reckon is likely to be value accretive,” Aditya Jhawar of Investec said.

Belrise is expanding its addressable market by leveraging on its underlying manufacturing capabilities in the auto segment to produce components for non-automotive categories like solar, defence & aerospace.

Although subscale, these ventures offer ramp-up potential. It currently supplies sheet metal structures for solar panels to a North American solar power company. However, the recent tariff structure negatively impacts its competitiveness, which could potentially derail its ramp-up plans here.

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Additionally, Belrise has established a wholly owned subsidiary to pursue opportunities in the defence and aerospace sectors. It has already secured orders from two Indian defence OEMs as well as one Israeli defence OEM for their armoured vehicle platforms.

Key Risks

Despite all positives, analysts have pointed to a slew of risks that could hinder the growth of the company. Rising EV adoption poses a threat to ICE-specific components. Belrise, which derives 21% of its revenues from sales, faces redundancy risks. Almost 70% of its revenue comes from the two-wheeler industry. Hence, a slowdown in demand for 2Ws would be a concern for Belrise. Bajaj Auto contributes a massive 50% to its total revenue.

Lastly, Belrise Industries, through its wholly owned overseas subsidiary, engages in the trading of commodities such as welding electrodes and lithium-ion batteries in the Middle East and Asia Pacific markets. This business is a major drag on profitability, given its poor margin profile. Additionally, the inventory-led model also exposes the business to commodity price volatility.

At about 11:50 am, shares of Belrise Industries were quoting at Rs 153, higher by 5.5% from the last close on the BSE. Belrise Industries’ stock price has risen 57% in the last 6 months.

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