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Tuesday, March 15, 2011

Balkrishna Industries Ltd:-Buy/sell/hold,growth prospects and recomendation,news and results,target price and analysis,views and outlook

Scripscan:Balkrishna Industries Ltd
Traded in:Nse-Bse

Story:Balkrishna Industries LTD (BIL) is the flagship company of the Siyaram Poddar Group, engaged in manufacturing speciality tyres used by the agriculture and Off The Road (OTR) segments. BIL earns 90% of its topline from exports with Europe and US being the highest contributors. It has a 3% global market share, ~1800 SKUs (Stock Keeping Units) and 3 plant locations across India, fourth one in pipeline coming up at Bhuj in the state of Gujarat and expected to go on stream in FY13E. BIL has an achievable capacity at 75% of installed capacity due to the high variety-low volume nature of the business.BIL has an alcove market presence in the global OTH tyre industry, with its presence in economically low cost producing country; the company has the capability of delivering globally approved quality products at cheaper prices.Balkrishna would spend Rs200 crore in upgrading its existing facilities - one in Aurangabad and two in Rajasthan — by September 2011 to meet the growing demand of tyres.The fundraising will be done through ECB route ($175 million) and balance from the internal accruals. At present, BIL’s products are priced at ~25% discount to other OTR tyre manufacturers.As an outcome the company has an ability to pass on the increase in its raw material prices at regular intervals and avoid taking a steep hit on its margins.With volume growth from its Greenfield expansion at Bhuj commencing from FY’13, rising growth from global infrastructure and mechanization of agricultural equipments is expected to provide a fillip to the top line (29% revenue CAGR between FY 10-FY 13E.At CMP of Rs.134, the stock is trading at a PE of 5 times its fy12 forward earnings.Altogether a safe defensive bet.

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