Prakash Diwan of Altamount Capital told CNBC-TV18, "The tyre segment continues to offer a lot of promise primarily because we have started seeing companies reach scale which is very essential in a business where the input is a pure commodity. What Balkrishna Industries has done is, if you see the FY15 performance, it has been fairly decent. At about 8 percent they have grown in spite of Europe having turned around only towards the later half of the year."
"The other thing they have done is they have started expanding into bigger radials. These are radials which are the extra large segment of radials which is very high margin. They have also had a very favourable hedging position on Europe. So, they are not going to suffer because of this revaluation. In fact Apollo Tyres and the other players have started taking price hikes. So, that makes Balkrishna very attractively placed. So, that is going to help them dramatically this year," he added.
It is valued at just about 12 times FY16 and this cut has made it much more reasonable. Rs 700 or whatever it is at, makes it very attractive. You could get a 20-25 percent upside very easily. Balkrishna has always been into specialised niche segment and it is difficult to get your brand accepted there. They are scaling up; the Bhuj plant, the capacity utilisation is going to be ramped up. Without any fresh investments if they can do that, it is going to be much more better for them to beat the competition on this," he said.
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