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MOSL: BALKRISHNA INDUSTRIES: Revenue beat driven by strong volume growth

BALKRISHNA INDUSTRIES: Revenue beat driven by strong volume growth

(BIL IN, Mkt Cap USD5.3b, CMP INR2164, TP INR2300, 6% Upside, Neutral)

 

• Balkrishna Industries (BIL)'s 1QFY23 operating performance was largely in line. While strong volume growth drove a beat on revenue, margins were hurt by high RM costs and higher other expenses.
• We cut our FY23E EPS by 5% to account for higher RM and freight costs and maintain our FY24E EPS. Maintain Neutral with a TP of INR2,300 (premised on ~22x Sep'24E EPS).

 

Higher raw material and freight costs hurt margin

• BIL's 1QFY23 revenue/EBITDA grew 49%/1.5% YoY to INR27.3b/INR5.3b, respectively, while adj. PAT declined 11% YoY to INR3.2b.
• Volumes rose 21% YoY to 83.15k tons (v/s est. 77.5k tons). Realizations improved 23% YoY (4% QoQ) at INR327.9k/unit (v/s est. INR318.5k), benefitting from price hikes taken during 1QFY23.
• Gross margin, however, contracted 3.8pp YoY and 1.2pp QoQ to 46.6% (est. 46%) led by RM inflation. RM costs are likely to cool down in 4QFY23E.
• EBITDA margin contracted 9.2pp YoY to 19.6% due to higher RM costs and other expenses (freight costs rose 7.2pp YoY as a percentage of sales). EBITDA grew 1.5% YoY to INR5.35b (est. INR5.4b). Logistic costs are, however, expected to reduce by end-3QFY23 or early-4QFY23.
• Lower other income led to an 11% YoY decline in adjusted PAT to INR3.2b (est. INR3.4b).
• BIL declared its first interim dividend of INR4/share.