Balkrishna Industries - Export Base To Turn Favorable From Coming Months: ICICI Securities

ICICI Securities Report

Indian off-highway-tyres exports improved sequentially by 12% in July 2023 (in line with average monthly exports in CY23), though were down ~20% YoY.

Agri segment exports increased 4% month-on-month to ~$85 million as against off-the-road segment exports at their highest in CY23 at $52 million, up 27% month-on-month.

Export base may reduce substantially Aug’23 onwards, resulting in YoY decline quantum shrinking from the current elevated levels for both the segments. Elevated base in U.S. OTR continued to impact segmental numbers and we expect that to persist till CY23 end.

In agri segment, too, U.S. base would remain elevated till CY23 end, though base for Europe would become favorable from Aug-23 itself.

For Balkrishna Industries, we maintain our estimates with 'Add' rating. We revise our target price (discounted cash flow based) to Rs 2,669 (earlier Rs 2,577), implying 26.5 times FY25E earnings per share.

Downside risks

Weakness in retail offtake from key markets would impact volume offtake for Balkrishna Industries in coming quarters, post weak volumes in the past few quarters due to inventory destocking.

Inability to grab further market share in global OHT market due to intense rise in competition.

Inability to go back to 28% operating margin level due to adverse input cost scenario and higher competition.

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