Balkrishna Industries Ltd. share price target

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Balkrishna Industries (BIL) delivered an operationally in-line performance in 3QFY25, with Fx gains driving an Adj. PAT beat at INR4.4b (up 43% YoY, vs. est. INR3.8b).

Balkrishna Industries (BIL)’s 2QFY25 was operationally better than expected with EBITDA of INR6.2b (+13% YoY, est. INR5.9b), led by better ASP and lower promotional expenses.

Quarterly Update Q1FY25

A 4.7% beat in topline resulted in in-line EBITDA, though PAT was 14.3% above estimates on higherthan-expected other income.

Quarterly Update Q4FY24

Strong earnings beat on robust volume growth (+12.8% q-o-q), healthy realisations (+3.9% q-o-q), and sharp gross margin expansion (+160bps q-o-q). Revenue and EBITDA exceeded estimates by 16.2% and 18.2%, respectively.

Quarterly Update Q3FY24

Balkrishna Industries (BIL)’s Q2FY24 EBITDAM, at 24.4%, was up 170bps QoQ driven by a combination of lower raw material basket (RMB) cost, better product mix and favourable hedge rate. Post-inventory destocking at the dealer level in the last few quarters, inventory is now at normalised levels of 2-3 months, from highs of ~4 months.

Quarterly Update Q2FY24

Indian OHT exports in Aug’23 improved 4%/1% MoM/YoY and now is back in line with average monthly exports in CY23. Agri segment exports increased 6% MoM to ~USD 90mn as against OTR segment’s exports being at their highest in CY23 at USD 52mn, flat MoM. With export base reducing substantially from Aug’23, YoY, industry has shifted from a declining trajectory to a growing one.

Indian OHT exports improved sequentially by 12% in Jul’23 (in line with average monthly exports in CY23), though were down ~20% YoY. Agri segment exports increased 4% MoM to ~USD 85mn as against OTR segment exports at their highest in CY23 at USD 52mn, up 27% MoM.

Weakness in OHT exports from India intensified in Jun’23 and touched their lowest in past 2 years, down 30% YoY to USD 122mn. This was due to continued weak demand, impact of cyclone in Gujarat and deflationary pricing. A week’s production loss from the leader with an average market share of 50%, implies overall exports got hit by ~12.5% -- adjusted for which, it was largely in line with past 6-month average export level.

Balkrishna Industries’ (BIL) Q1FY24 EBITDAM at 22.7% was up 240bps QoQ, driven by a combination of lower raw material basket (RMB) cost, better product mix, lower freight cost and favourable hedge rate. BIL is confident of improving its global OHT market share from ~6% now to ~10% in 4 years and would do the due capex when needed to scale up.

Quarterly Update Q1FY24

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.