Balkrishna Industries’ Q1 Profits Up 40%

Balkrishna Industries (BKT) announced its Q1FY14 numbers on August 1. Although the company has seen a drop in revenues, its profitability has shot up massively.

BKT’s net sales declined to Rs 807.44 crore in the quarter, a decline of 1.47% as compared to that in Q1FY13. However, its other operating income grew five times to Rs 8.44 crore. This helped in minimising the effect of lower sales. The company posted revenues of Rs 815.88 crore, which marks a decline of 0.64%.

Although the revenues showed a decline, the profitability of BKT impressed the street. Its operating profits grew by 6.88% to Rs 143.43 crore. The EBITDA rose 13.75% to Rs 178.73 crore.

In the quarter under review, BKT’s other income grew 33 times to Rs 17.05 crore. At the same time, its interest and finance charges declined by 30.05%. It also reported a net loss of Rs 1.38 crore under the head ‘Foreign Currency Transactions and Translation’, down from Rs 20.32 crore in Q1FY13.

All the above factors put together resulted in a 40.16% increase in BKT’s net profits, which came in at Rs 102.44 crore. This translates into a 277 basis points expansion in the company’s EBITDA margin to 17.58% and a 366 basis points rise in its net profit margin to 12.56%.

We have been bullish on the prospects of BKT on account of its extensive presence in international markets, the nature of its product portfolio, easing of raw material prices and last but not the least, its past performance. The  June 2013 quarter results are in line with our expectations, and we maintain our outlook on the company.