Smooth ride for tyre exporter Balkrishna Industries as peers struggle

The company, which exports off-highway tyres, has generated 43 per cent returns in this time compared to MRF and Apollo Tyres, which are down 5-10 per cent. In addition to better-than-expected performance in the March quarter, exports and market share gains have helped Balkrishna pull ahead of peers.

Rishi Vora and Praveen Poreddy, analysts at Kotak Institutional Equities, said MRF, Ceat, and Apollo Tyres had a weak quarter due to weak demand for tyre replacements in the commercial vehicle segment and obligations for extended producer responsibility (EPR).

Balkrishna reported a strong quarter led by sales volume growth, product mix, tight cost control, and favourable foreign exchange. Riding on a volume growth of 13 per cent to 82,085 tonne, the company reported a 15 per cent rise in standalone net sales for the quarter to Rs 2,673 crore.

Operating profit margins in the March quarter were robust at 24.9 per cent, up 460 basis points year-on-year (Y-o-Y) and 125 basis points sequentially.

Volume growth, margin expansion, and higher other income led to a net profit of Rs 481 crore, up 88 per cent Y-o-Y and 56 per cent sequentially.

Balkrishna stands out amongst its peers because of its healthy margins, return ratios profile, and strong balance sheet, according to analysts Shashank Kanodia and Manisha Kesari of ICICI Securities.

The brokerage has a hold rating on the stock given the sharp run-up in its price over the past month with gains of about 25 per cent..

Keynote Research is positive on the prospects of Balkrishna and has revised its rating from reduce to neutral with a target price of Rs 2,995 at 36 times its FY25 earnings.

Chirag Maroo, an analyst of the brokerage, said the company would be able to pass on the increase in costs to customers, leading to a stable operating profit.