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Dolat Capital Report
Balkrishna Industries Ltd.'s displayed an improved performance sequentially. Revenue grew 2.4 % QoQ to Rs 22.79 billion led by 3.1% QoQ volume growth. Ebitda grew 4% QoQ with expansion in operating margin (plus 35 basis points QoQ) at 23.6% led by better mix and benefit of operating leverage.
Management expects Q4 volume to be flat and margin to be under pressure due to increase in freight rate led by ongoing red sea issue. Company is trying to pass on the increase in freight rate to the customer.
Despite near term hiccups, we maintain a positive view on stock led by improving demand in Europe/U.S, strong growth trajectory in domestic market and faster clearance of channel inventory due to production cut is expected by European peers due to supply chain issue.
We expect lower cost advantage and strong backward integration would help Balkrishna Industries to increase wallet share in Agri and Off the Road. We forecast 25% earning per share compound annual growth rate over FY24-26E and recommend to Accumulate with target price Rs 2880(28 times FY26E earning per share).
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