MOSL: BALKRISHNA INDUSTRIES (Neutral)-Strong revenue growth dilutes RM cost inflation
BALKRISHNA INDUSTRIES: Strong revenue growth dilutes RM cost inflation
(BIL IN, Mkt Cap USD6.1b, CMP INR2361, TP INR2600, 10% Upside, Neutral)
- BIL’s 2QFY22 performance was led by strong demand tailwinds across geographies and segments, leading to its highest ever volumes. Aided by launches, it is gaining market share in geographies, including the US.
- We maintain our FY22E/FY23E EPS as upgrades in volume is being offset by higher RM costs. We maintain our Neutral rating due to rich valuations.
Price hikes taken, but Logistics costs are yet to be fully covered
- Revenue/EBITDA/adjusted PAT grew 34%/8%/20% YoY in 2QFY22 to IN20.8b/INR5.5b/INR4b. The same grew 57%/43%/66% YoY in 1HFY22.
- Volumes grew 19% YoY (+6% QoQ) to 72.75k tonne (est. 67.35k tonne). Realizations grew 13% YoY and 7% QoQ to INR285.9k/unit (est. INR271.8k). The QoQ growth in realizations was driven by 2-3% price hike in Jul’21 for RM cost inflation and additional price hikes for partial pass through of cost inflation in logistics.
- Gross margin contracted by 520bp YoY and 180bp QoQ to 55.4% (est. 57.5%) due to RM cost inflation. While it had largely passed on the entire commodity cost inflation, it could only pass-through partial logistics cost inflation on both imported inputs as well as exports.
- Higher other expenses (logistics cost impact on exports) resulted in a 640bp YoY (-240bp QoQ) EBIDTA margin decline to 26.4% (est. 28.8%).
- Higher other income boosted adjusted PAT to INR4.1b (est. INR3.5b), a growth of 20% YoY and 14% QoQ.
Balkrishna Industries Limited is engaged in offering pneumatic tires. The Company offers tires, tubes and tire flaps. It focuses on manufacture of a range of off-highway tires (OHT). These tires are mainly meant for agricultural, industrial and construction, earthmover and port, mining, forestry, lawn and garden and all-terrain vehicles (ATV). It offers tires for compact loader, compact utility tractor, cotton picker, forwarder, go-kart, golf kart, harvester, hay harvester/baler, mower, orchard harvester, pivot irrigator, rotor rake, rototiller, sprayer, spreader, tanker, tractor, trailer, trencher, universal vehicle and vineyard harvester. The Company offers tires for backhoe loader, compact dumper, compactor, container handler, excavator, mobile home and skid steer. It also offers tires for dozer, haul train, load haul dump (LHD) and underground mining vehicles. Its products include AGRIMAX RT 855, PL 801, EARTHMAX SR 41, EM 934, AGRIMAX TERIS and EARTHMAX SR 30, among others.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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