'Buy' This Stock For +20% Upside In 1 Year: Sharekhan Recommends

Brokerage firm Sharekhan has recommended investors to buy Balkrishna Industries Ltd's stocks with a potential upside of 20.21%, within a target period of 6 months (2 quarters).

Target Price

The Current Market Price (CMP) of Balkrishna Industries Ltd is Rs. 2246 The brokerage firm, Sharekhan has estimated a Target Price for the stock at Rs. 2700. Hence the stock is expected to give a 20.21% return, in a Target Period of 6 months.

Stock Outlook
Current Market Price (CMP)	Rs. 2246
Target Price	Rs. 2700
1 year returns	20.21%

Company performance

Balkrishna Industries Ltd. reported lower-than-expected operational performance, led by increased raw-material price and higher freight rates. Net revenue grew by 32.1% y-o-y to Rs. 2,050 crore in Q2FY2022, driven by 18.8% volume growth at 72,748 MT of tyres and 11.2% improvement in average realisation. EBITDA margin declined by 350 bps q-o-q to 25.4% in Q2FY2022 due to rise in raw-material costs and increased freight rates. As a result, EBITDA and adjusted PAT improved by 2% y-o-y and 11.1% y-o-y to Rs. 519 crore and Rs. 377 crore, respectively. The brokerage firm has mentioned that the stock trades at P/E multiple of 21.6x and EV/EBITDA multiple of 15.1x its FY2023E estimates.

Comments by Sharekhan

According to Sharekhan, "We upgrade our rating on Balkrishna Industries Ltd.'s to Buy with a revised PT of Rs. 2,700 given robust outlook and earnings growth. We expect strong double-digit volume growth in FY2022E, driven by infrastructure creation and pick-up in economic activity and continued market share gains."

About the company

Balkrishna is one of the leading manufacturers of over-the-highway tyres. The company makes tyres that are used in various applications, including agricultural, construction, and industrial vehicles as well as earthmoving, port, mining, ATV, and gardening. Balkrishna is a global player present in Europe, US, and India.

Disclaimer

The above stock was picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

(Also read: 'Buy' This Stock For +17% Upside In 6 Months: HDFC Securities)