BIL has shelved its USD100mn US capex plan due to bleak outlook. Management expects the weak demand scenario and pricing pressure to persist in FY20. However the growth guidance for FY20 has been maintained on account of pent up demand from channel. At CMP, the stock is trading at a valuation of 16.1XFY20E and14.7XFY21E earnings. We arrive at a revised target price of INR 698 valuing the company at 14XFY21E EPS, and maintain a SELL rating on account of weak demand outlook and macro uncertainties in key markets.
Outlook and valuation: On weak wicket; downgrade to ‘REDUCE’ Due to subdued demand scenario over the medium term and high capex of ~INR28bn over FY19-21, we revise down FY19/20E EPS 15%/14%. We value BKT at 15x Q2FY21E EPS and downgrade our recommendation to ‘REDUCE’ from ‘HOLD’ with revised TP of INR658 (INR797 earlier).