Friends, we had posted about Balkrishna Ind (BKT) and highlighted about their superior business model when compared to the regular tire industry. The story has only become stronger and there is much more visibility on the growth ahead. Our friend Donald Francis visited BKT to get in-depth understanding on the company and get answers to some of the queries. Few highlights:
Co targets to be a $ 1 Bln turnover company by 2015
Co targets to capture about 10% global market share by then
We have grown sales in FY 11 at over 40%. If we had capacities, we could had sold much more
Order book is there for 5 months and the margins are protected at about 18-20%
Please check out the complete management interview (requires free login).
Key Takeaways from the interview:
- The co seems to be on track to continue its spectacular track record of growing at a CAGR of 29% for last 13 years. Their target of $ 1 Bln turnover and 10% market share seems quite achievable.
- For FY 12, BKT may be able to do a 25-30% growth resulting into a turnover of 2500-2700 Cr.
- There were concerns on the growing competition and we asked the management about the same. It seems the market is big enough for 2-3 players to operate like BKT and take away the market share from biggies. Other players will take quite some time to catch up.
- So if the company is able to do a turnover of about 2500 Cr with 18.5% OPM, it may post a NP of about 240 Cr, resulting into an EPS of about 25 for FY 2012. CMP of 156 discounts it by just 6.5 times.
We feel that as BKT is entering the big league and making its presence felt in the global OTR space, the stock deserves a re-rating also. It would be tough to find companies having a consistent growth of about 30% for last 13 years with good margins, ROCE etc available in single digit PE multiples.
Ayush,
so you feel even at current price its a good Long Term bet? what time frame would you look, would appreciate if you can provide a fair value for this stock with good MOS.
Thanks
Hi Vikrant,
I think its a very good long term bet. One should target the stock on declines, if any.
As discussed in the post above, BKT may do a turnover in the range of 2500-2700 Cr. As the rubber prices have started correcting, they may do margins better than 18-19%. Even if we take the turnover at say 2500 Cr with 18.50% OPM, the co may post an EPS of about 25.
Regards,
Hi,would be great full if you could provide your views on SKumar.
Hi Aman,
Sorry, we don’t the stock.
Ayush,
What is view on Natural Rubber prices?
Hi Jigs,
I think they will continue to soften but I don’t expect a major crash or something like that. Over a longer term, this is another commodity whose usage has to keep increasing while production is limited.
Are you looking for some particular detail on natural rubber price trend?
Any interesting ideas at your end?
Thanks & Regards,
Thanks Ayush. I was looking at tyre stocks as me too feel Natural Rubber has made intermediate top around $2.80/lb in Feb 2011 and they are NOT going to cross this high in next 6-9 months which is positive for tyre stocks which doesn’t have demand issues.
At present I hold and like Abrasives, Bearings, Starch and Agri Input stocks.