Neutral on Balkrishna Industries, target price Rs 2425: Motilal Oswal

Motilal Oswal has neutral call on Balkrishna Industries with a target price of Rs 2425. The current market price of Balkrishna Industries is Rs 2345.

Time period given by analyst is one year when Balkrishna Industries Ltd. price can reach defined target.
Balkrishna Industries Ltd., incorporated in the year 1961, is a Large Cap company (having a market cap of Rs 45327.08 Crore) operating in Tyres sector.


Financials
For the quarter ended 31-03-2021, the company reported a Consolidated Total Income of Rs 1814.74 Crore, up 16.04 % from last quarter Total Income of Rs 1563.84 Crore and up 26.22 % from last year same quarter Total Income of Rs 1437.76 Crore. Company reported net profit after tax of Rs 379.95 Crore in latest quarter.

Investment Rationale
BIL ranks the highest among domestic peers in terms of cost competitiveness and financial strength. The brokerage expects BIL’s outperformance to the industry to continue, with the focus on strengthening its competitive positioning. With a current market share of ~6% in the USD15b global Specialty Tyre segment, BIL aspires to increase this to 10% over the next 4-5 years. It estimates 20%/22%/22% revenue/EBITDA/PAT growth over FY21- 23E. Current valuations fairly reflect for its industry leading margin, FCF, and capital efficiencies, the current valuation premium is excessive. It values BIL at 25x Sep-23 EPS (at a 25%/80% premium to its 5/10 year average P/E of 20x/14x) with a TP of INR2,425.

Promoter/FII Holdings
Promoters held 58.3 per cent stake in the company as of Dec 30, 2020, while FIIs held 15.5 per cent, DIIs 15 per cent and public and others 11.2 per cent.