Balkrishna Industries Ltd. share price target

Q2 results were ahead of estimates across parameters; BKT posted best ever quarterly volumes; OPM rose 540 bps yoy to 32.8% BKT is witnessing strong demand traction particularly agri segment and has raised...

Background: Balkrishna Industries (BIL) is focused solely on 'off-highway' tyres catering to agricultural & industrial segments. The company has a ~7% share of the global market. While OTR forms ~65% of the global market, for BIL, it only contributes ~33% to its revenue. The company has been undertaking various actions like setting up warehouses in markets in North America and Europe to be closer to the customer and have a just in time (JIT) system. The company sales cover over 130 countries through distribution network in Americas, Europe, India and Rest of the world....

Balkrishna Industries (BIL) reported healthy Q1FY21 results under the circumstances. Decline in standalone revenues was limited to 22.2% YoY (| 929 crore), tracking 25.7% decline in total tonnage to 38,096 MT during the Covid impacted quarter. Encouragingly, the company expects to close FY21E with similar volume levels as FY20 (~2 lakh MT). EBITDA in Q1FY21 was at | 230.6 crore, down 13.9% YoY, 38.1% QoQ. Margins fell 262 bps QoQ to 24.8%. QoQ decline in margin performance was on account of negative operating leverage although gross margins recorded a strong 511...

Balkrishna Industries (BIL) Q1FY21 EBITDA performance was broadly in line with our estimates. EBITDA de-grew 14% YoY at Rs 2.3bn, with margin at 24.8% (+239bps YoY; -262bps QoQ) (vs est of 24.6%), on...

Management positive on trends. Management has expressed greater optimism about US and Europe demand from the agricultural sector, which would be key drivers for FY21. While it expects flat volumes for FY21, we expect 5% volume growth based on our channel checks, assuming no further lockdowns. Also, revenues from carbon black over and above that required for captive purposes would be the catalyst of overall growth. Accordingly, we...

Completion of capex to support FCF and profitability For FY21, BIL has given a capex guidance of ~Rs 6bn for FY21, including maintenance capex of Rs 1.5bn. Residual capex for Waluj and Bhuj plants of Rs 5bn is likely to be completed by FY21 end with a maximum delay of one quarter. We expect FCF to improve significantly from FY21 onward as most of the planned capex has already been incurred. The earlier plan of setting up a Greenfield plant in USA has been kept in abeyance, citing...

Background: Balkrishna Industries (BIL) is focused solely on 'off-highway' tyres catering to agricultural & industrial segments. The company has a ~7% share of the global market. While OTR forms ~65% of the global market, for BIL, it only contributes ~33% to its revenue. The company has been undertaking various actions like setting up warehouses in markets in North America and Europe to be closer to the customer and have a just in time (JIT) system. The company sales cover over 130 countries through distribution network in Americas, Europe, India and Rest of the world....

BIL stands apart from the rest of the tyre pack in respect of its business model (niche export-oriented player in off highway tyre i.e. OHT segment, serving agri & OTR industries), with Europe (51%) and North America (17%) forming 68% of revenues (India comprises ~20% of topline; BIL has ~5-6% market share domestically). For BIL, agri: OTR product mix is at 61:35, with replacement demand forming 75% of overall pie. BIL's export focus helped it comprehensively outperform domestic tyre manufacturers in Q4FY20, with volumes growing 4.7% YoY to 57,966 MT its highest quarterly...

Background: Balkrishna Industries (BIL) is focused solely on 'off-highway' tyres catering to agricultural & industrial segments. The company has a ~7% share of the global market. While OTR forms ~65% of the global market, for BIL, it only contributes ~33% to its revenue. The company has been undertaking various actions like setting up warehouses in markets in North America and Europe to be closer to the customer and have a just in time (JIT) system. The company sales...