Balkrishna Industries' Q4 FY25 operational performance was in line, although PAT was below our estimate primarily due to a forex loss. Ebitda at Rs 7 billion was in line with estimates.
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Motilal Oswal Report
Balkrishna Industries Ltd. continues to face demand headwinds in its key global markets. Hence, we cut our earnings estimates by 8% each for FY26/FY27. Further, its foray into the provision coverage ratio/truck-bus radial segments is likely to be critically monitored from here on for:
whether or not it is able to gain material traction in these segments and
would margins and returns be materially dilutive in the long run.
While the stock has not done well in the recent past and its valuations at 27.7x FY26E and 22.9x FY27E are not too demanding, its future target multiple is likely to be a function of its success in these new segments.
The success will not only be in terms of market share gains but also without materially hurting core returns – which is likely to be a herculean task, in our opinion. We retain our target multiple for Balkrishna Industries and continue to value it at 22x FY27E. However, this may warrant a change going forward if Balkrishna Industries' returns plunge due to this foray. Reiterate Neutral with a target price of Rs 2,553.
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