Balkrishna Industries

I track this company for many years now… Few observations … Not in any order of importance but my overall current impression.

  1. Titan International sales in March quarter '15 is down but they claim 60% of this drop is due to currency adjustment. Against this, most of the high margin gain in Q3 15 for BKT was due to currency gain.

  2. Large equipment machinery sales in US is down 48% in March quarter but their market share is up. They attribute it to the adoption of LSW assembly technology (Low Side Wall) by many OEM.

  3. They have taken management control of Voltyre Prom in Russia and expect to have better foothold there in coming months. Titan / Goodyear ATV has an advantage of supplying entire wheel assembly to OEM where companies like BKT is at disadvantage as they have to follow the emerging technological trends to adjust their tire manufacturing for sales in the replacement market. I don’t know how much lead time is needed for these types of adaptation.

  4. Pirelli, the largest ATV, OHT, Agri tyre company of Brazil is recently taken over by China Chem. (I think, it will increase competitive intensity on price front in Latin American market and possibly in US market too).

  5. BKt has set up their new warehouse in California recently. It may help them in West Coast market.

  6. Now Alliance and BKT has similar SKU varieties (2500 - 2600). Where Alliance reached in 8 years in revenue, BKT took many years to reach there (they are at same revenue level now). Also, their Israel facility / KKR backing / existing network of GPX gives them an edge in penetrating incremental US market (it is my opinion).

  7. The results of Michelin, Yokohama Rubber and Bridgestone would give an overall direction of the demand scenario in the sector across the world. I am yet to check these.

  8. I am not really concerned with the bloated debt / WC level of BKT if they can reach full achievable production capacity of 3 L ton by end 2017 or end 2018 with 22% margin level.

Let’s see how it goes from here …

Disc: Presently no holding.

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