ICICI Securities recommends 'Add' on Balkrishna Industries, raises price target

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Balkrishna Industries shares were up 1 percent to Rs 2,476.40 on June 21 at market close as brokerage firm ICICI Securities has given an ‘Add’ rating for the stock.

The brokerage has raised the target price of the stock to Rs 2,577 prompted by favourable off-highway tyre (OHT) exports from August and anticipated volume growth.

ICICI Securities analysts anticipate a 5 percent to 12 percent volume growth for BIL in FY24 and FY25 with estimated operating profit margins of 22 percent to 24.5 percent.

In the report, ICICI Securities stated that BIL’s share of India’s OHT exports increased to around 50 percent in the first half of FY23 due to excess stocking at the dealer level. However, in Q3FY23 the share dropped to about 36 percent owing to normalised inventory levels. In Q4FY23, the BIL’s share rebounded to 53 percent in line with the long-term mean levels.

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ICICI Securities expects BIL’s volumes to bottom out in the second half of the year. The domestic brokerage firm expects Balkrishna Industries to enter into a growth phase and start reporting volumes of 80,000 tons a quarter from H2FY24 onwards. “We are building FY24 volume of BIL at 316k tons, up 5 percent YoY,” reported ICICI Securities.

In the quarter ended March, India’s key OHT player, BIL reported an 18 percent year-on-year increase in sales to Rs 9,760 crore. The net profit lowered 27 percent YoY to Rs 1,057 crore for FY23. Operating profit margins stood at 17 percent while the EPS was down 26 percent to Rs 54.70.