Balkrishna Industries’ (BKT) topline at Rs 9.1bn (+7% YoY) was ahead of expectations as volumes improved (+11% YoY). EBITDA margin at 28% (- 452bps QoQ) was lower as higher commodity prices/other expenses offset lower employee cost. BKT enjoys significant cost (30% lower than peers) advantage in the OHT segment and thus is able to generate high margins. The company has sufficient capacity (57% utilisation) to maintain steady volume growth over the next 3-4 years. We believe BKT will grow faster on account of rising penetration in new geographies like India and OEM segment.

They raise FY17/18E earnings by 9-11% to incorporate increase in volume growth guidance to 160-170k in FY17E. Maintain BUY with a revised TP of Rs 972 (earlier Rs 823) based on 14x FY18E EPS. Antidumping duty in US (CVD of 4.7%) is a key risk to our view. The final decision on the same is due by Jan- 17.