BILT primed for growth says market watchdogs

The Ballarpur Industries stock which has plummeted by more than 20% since its December quarter financial results were announced.

11 Apr 2013 | By Mihir Joshi

Currently, the stock trades at Rs 17.4. As on 31 December, the company’s total consolidated debt (long-term plus short-term borrowings) were as high as Rs 4650 crore. Compare that with its current market capitalisation of a mere Rs 1140 crore. Needless to say, high leverage translates into higher interest expenses affecting the profitability of the company.

But the recent under-performance of the firm’s shares makes valuations look attractive. At the current market price, it trades at about 4.3 times estimated earnings for FY14. Ballarpur Industries has raised prices in the recent past, which is likely to lead to an improvement in revenue and offer some comfort to profitability.
 
The company is likely to show better topline growth and margins on the back of healthy volume growth in paper segment and realisation growth as it has already taken price hike of about 3,000 per tonne to make up for significant jump in wood price.
 
In the long-run, one of the main threats for paper demand in general is the increasing use of digital technology. 
 
Another risk in particular is the fact that Ballarpur Industries’ paper production is wood based and, therefore, it faces a risk of unavailability of the right raw materials on account of depletion of forest resources.
 
Analysts expect Ballarpur Industries’ financial performance to show improvement from next fiscal year onwards, making the medium term outlook attractive.