Balkrishna Industries slipped ten percent as the market digested its earnings report for the quarter ended June and the demand scenario for growth prospects.
The tyre manufacturer posted a growth of 47.6 percent on-year in net profit at Rs 490 crore for the first quarter ended June as compared to Rs 332 crore in the same quarter in the previous year. The company's operational revenue rose by 25.7 percent to Rs 2,714.5 crore, up from Rs 2,159.4 crore in the same period last year.
However, Balkrishna Industries stock price fell for the third session, despite its Q1 coming in-line with estimates as the demand outlook remained poor. At 1.45 pm, the stock price was quoting Rs 2,848.95 on the NSE, lower by 7 percent.
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Japanese brokerage Nomura downgraded the tyre-maker despite the Q1 show coming in ahead of estimates. Nomura has a neutral rating, with a lower target price of Rs 3,115 per share.
"Our demand indicators suggest that demand has slowed down substantially, led by weak OE, lower farm income levels, and high interest rates affecting replacement demand. Global peers also echo similar sentiment and expect recovery to be delayed further," said Nomura.
Nomura expects BIL’s volume growth to slow substantially from Q2, partly offset by strong performance in India. Rising commodity/freight rates will likely impact margins as well, albeit to normalise by FY26F.
"Near term, demand outlook is weak for key regions, and there is a notable uptick in
input/freight costs. We are, hence, cutting FY25–27E EBITDA by 5-7 percent," said Nuvama Institutional Equities. The brokerage cut its target price to Rs 3,500 per share, but retained its buy call.
"Although near-term outlook for the underlying industry is weak, we expect the company to outpace the industry riding its compelling quality-price mix," added the brokerage.
Over the past year, Balkrishna Industries shares have climbed 20 percent. In comparison, the domestic benchmark Nifty 50 has gained about 26 percent during the same time period.
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