Balkrishna Industries sheds 3% on bleak growth outlook by brokerages

Shares of Balkrishna Industries (BIL) declined more than 3 percent in early trade on June 10 after brokerage firms suggested that persistent near-term headwinds and channel de-stocking could potentially dent volume growth in the coming quarters.

At 11:25am, Balkrishna Industries was trading at Rs 2,325 apiece, down 3.8 percent from the previous day’s close on the National Stock Exchange.

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Brokerage firm Nomura has said that while channel inventory is still higher than normal, end-user demand is holding up. The broking firm has said that the stock trading at 16x FY25 EV/EBITDA (earning before interest, tax depreciation and amortization) is expensive, given the risks to recovery. Nomura has a ‘reduce’ rating on the stock.

Motilal Oswal Financial Services Ltd (MOFSL) has said that the end-markets remain challenging, and there are liquidity-related issues in the company.

The company has said that it aims to gain a 10 percent share of the global off-highway tyre industry in the next 3-4 years as against the 5-6 percent share it holds. BIL plans to expand its geographical footprint and product range. The tyre manufacturer sees good scope to increase the market share in the OTR segment (non-agri) and in markets like the US and Eastern Europe.

MOFSL’s note also added that BIL is targeting new products like rubber tracks (under validation) used in farm equipment. “It will continue to invest in building a brand across markets through sponsorship for sports,” it said.

ICICI Securities has an ‘add’ rating on the stock and predicts that OTR offerings could also enable BIL to enhance its presence among original equipment manufacturers (OEMs) and expand in markets like Australia, and Eastern Europe.

BIL’s Bhuj Plant in Gujarat is spread over 470 acres and accounts for nearly 50 percent of the company’s total capacity. The management is of the view that the capacity can be increased further by 100,000-150,000 tonnes.

Located in an earthquake-prone region,  its entire infrastructure is designed in a way that it can withstand an earthquake of a magnitude of 9 on the Richter scale. It can also withstand a cyclone of up to 140-150km per hour wind speed.

The plant is just 75-80km away or about 2 hours from the Mundra Port, giving easy access for imports of raw materials and exports of tyres.

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