Balkrishna Industries shares hit new 52-week high post Q2 numbers
Shares of Balkrishna Industries, one of the leading manufacturers of over-the-highway tyres, extended their winning streak for the second consecutive trading session on Wednesday, rallying 2.84% to register a new 52-week high of ₹2,640. This increase in stock price is attributed to the company’s Q2 FY24 performance, which came in line with analyst estimates.
The company on Saturday reported a net profit of ₹335 crore for Q2 FY24, in comparison to ₹404 crore in Q2 FY23, while revenues came in at ₹2,226 crore, down from ₹2,704 crore. In Q2, the company faced challenges on account of heatwaves and recessionary fears in export markets, resulting in a drop in volumes during the quarter. The company volumes dropped by 10% YoY to 70.6k tons in Q2FY24. Sequentially, volumes improved by 5%.
Overall, the company expects a stable trajectory to continue and better H2FY24. However, given the H1FY24-related challenges and volume performance, the company expects FY24 volumes to de-grow marginally.
Following the company’s Q2FY24 performance, domestic brokerage firms have maintained their existing ratings on the stock.
Sharekhan: Maintains ‘Hold’ with a Target Price of ₹2,720
Domestic brokerage firm Sharekhan retained its ‘hold’ call on the stock with a revised target price of ₹2,720 apiece in the hope of a revival in demand in the medium term and improvement in EBITDA margins on a steady raw material cost trend.
The brokerage said the company continues to be a dominant player in the global OHT segment, supported by its strong distribution network, quality of product, and relatively low-cost production. However, it anticipates that the company may encounter challenges in the near term owing to ongoing destocking in the European market.
Motilal Oswal: Maintains a ‘Neutral’ rating with a Target Price of ₹2,500
“Balkrishna Industries (BIL)’s 2QFY24 operating performance beat our estimates, as it saw a healthy sequential recovery in overall business, mainly in India. Export markets remain uncertain, but 2H is expected to be better than 1H. FY24 volumes are likely to decline,” said Motilal Oswal.
Motilal Oswal has adjusted its FY24E/FY25E EPS upward by 3%/2% to account for favorable forex rates and improved realisation. It maintains a ‘neutral’ rating with a target price of ₹2,500, expecting Balkrishna Industries to continue outperforming the specialty tyre industry.
This projection is driven by an expanded product portfolio and increased focus on the OTR segment, enhancing competitive positioning.
Kotak Institutional Equities: Maintains a ‘Sell’ rating with a Target Price of ₹1,900
The brokerage continued with its ‘sell’ rating on the stock, citing an expensive valuation despite the recovery in profitability (EBITDA per kg). It has a target price of ₹1,900 apiece.
The brokerage expects volume trends to remain under pressure in FY2024E owing to heat waves and recessionary concerns in developed economies. Nevertheless, it anticipates volume to pick up gradually from CY2024E.
Cost pressures have eased over the past few quarters, and the Indian business continues to perform well with new business wins; however, the demand trends in Europe and the US remain muted currently (60% of its volumes), it noted.
The brokerage expects volume recovery (on a low base) and a better product mix will drive margin expansion in the medium term, however, it said the recent uptick in the RM basket may weigh on margins in the near term.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 25 Oct 2023, 06:07 PM IST
