Balkrishna Industries Ltd. share price target

We visited the Bhuj facility of Balkrishna Industries (BIL) and interacted with the management. Following are the key takeaways: 1) company is aiming at ~10% market share in the global off-highway tyre market in next 4 years vs current ~6.5% (as against expected industry CAGR of ~3-4% during the same period).

Post stocking up of inventory at distributor level in end markets between March and July CY22, India OHT exports have consolidated since August, facilitating de-stocking amidst steady retail demand.

Quarterly Update Q4FY23

Balkrishna Industries’ (BIL) Q4FY23 EBITDA margin at 20.3% was in line with our estimate and up 420bps QoQ, driven by gradual decline in the cost of consumed raw material basket (RMB) and relatively lower-priced freight contracts. BIL is aiming at 200-300bps EBITDAM improvement in FY24 over current levels –on the back of lower RMB cost, better hedge rate and further normalisation of logistics cost.

Indian OHT exports declined for the third quarter in a row in Q4FY23, from the highs of Q1FY23, as with the easing of container supplies, distributors in target markets started cutting down inventory from elevated ~120 days to targeted levels of ~60 days.