Balkrishna Industries Ltd. share price target

Industry OHT exports remained subdued in Jan’23, closer to Oct’22 lows, post spiking up in the seasonally strong Dec’23. Overall OHT export revenues were down 9% YoY in Jan’23 (up 6% FY23-TD) with the agri tyre segment down 12% YoY vs OTR down 3% YoY.

Post stocking up of off-highway tyre (OHT) inventory at distributor level in end- markets between Mar-Jul’22, India’s OHT exports from Aug’22 were muted as a result of destocking amid improving container availability. OHT exports from the country bottomed out in Oct’22 at ~US$130mn vs Mar-Jul’22 average of ~US$170mn and recovered to a 5-month high of US$152mn in Dec’22.

Balkrishna Industries’ (BIL) Q3FY23 EBITDAM, adjusted for forex losses, came in at ~16%, ~400bps lower QoQ. EBITDAM decline was due to GM decline of ~430bps QoQ on the back of removal of surcharge on ASP of CIF exports by ~6%. This coincided with the usage of higher cost raw material inventory and gradual transition towards falling container contracts.

Quarterly Update Q3FY23

Initiating Coverage Report

Our analysis suggests ~5-6% QoQ decline in volume for Balkrishna Industries (BIL), implying ~74-75k ton sales in Q3FY23 vs ~79k ton in Q2FY23.