Balkrishna Industries Ltd. share price target

Indian OHT exports improved sequentially by ~3% in May’23, though were down ~10% YoY. We believe industry would witness steep cuts YoY in Jun-Jul’23 on elevated base, post which the base would turn favourable along with inventory levels of distributors coming down to desirable levels of ~50-60 days by then.

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.