Company Update : Balkrishna Industries by Motilal Oswal Financial Services Ltd
Weak 1Q; hit by low demand and the tariff impact
* BKT’s volume declined 3.5% YoY to 80,664 MT (in line), impacted by weak global demand.
* Revenue was marginally up 1% YoY to INR 27.6b (in line) despite the weak volumes due to favorable forex movement, which led to 4.3% YoY growth in blended avg ASP.
* Gross profit margin was impacted by a lower share of exports (the India mix now at 35% of total volumes).
* EBITDA margin contracted 220bp YoY (-100bp QoQ) to 23.8% (below our estimate of 25%). Apart from the adverse mix, margin was hit by: 1) the impact of tariffs on sales to the US (the Americas now at 17% of the mix), and 2) lower sales volume.
* As a result, EBITDA dipped 8% YoY to INR 6.56b (vs. est. 7.05b).
* There was an MTM loss of INR 1.54b in 1QFY26 (vs. gains of INR0.06b in 1QFY25), which also hurt profitability.
* Overall, PAT declined 40% YoY to INR 2.87bn (vs. est. INR 4.3bn), with PAT margins shrinking to 10.4% (vs. 17.4% in 1QFY25).
* The Board declared an INR4/share interim dividend, maintaining its payout despite the PAT decline.
* Outlook:
* BKT retains ambitious growth plans with a revenue target of ~INR230bn by FY30, implying a 17% CAGR over five years.
* BKT is leveraging brand investments, manufacturing integration, and deep distribution to gain share in global OHT and Indian PCR/CV segments. The vision includes achieving 8% global OHT share in the medium term, with a longer-term aspiration of 10%
* Entry into new domestic tire categories (CV radial by Q4FY26, PCR by Q3FY27) to unlock ~20% of incremental revenues by FY30.
* Valuation view: The stock currently trades at 29.6x FY26E and 24.7x FY27E.
For More Research Reports : Click Here
For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412
