Buy Balkrishna Industries; target of Rs 2920: ICICI Direct

ICICI Direct's research report on Balkrishna Industries

Balkrishna Industries (BKT) is the leader in the niche tyre segment (OHT: Off highway tyres) used in heavy machinery for mining & agriculture purposes. Exports form lion’s share of its sales at ~80% of its revenues • Channel mix: replacement account for ~70% while OEM share is pegged at ~28%. Agriculture accounts for ~63% of volumes with OTR share at ~34% • It has consistently operated with high margins & return ratios • It has lean Balance Sheet with Net Debt: Equity at 0.2x as of FY23.

Outlook

We assign BUY rating on BKT amid healthy sales growth prospects coupled with margin recovery leading to robust bottom-line growth. Revising our estimates, we now value BKT at Rs 2,920 i.e., 30x P/E on FY25E EPS. Margins and RoCE is seen at 27.0% and 19.4% respectively by FY25E.