Balkrishna Industries

Agree @meditate that mkt share gains stays aspirational and a moving goal post.

In the absence of a third party credible report on mkt share, not sure how much weightage to give it. mkt share alone is however is not a prime aspect in my view as long as good growth is delivered.

Here is competition JFM qtr results and commentary

https://www.globenewswire.com/en/news-release/2022/04/26/2429451/0/en/Michelin-In-a-challenging-business-environment-sales-stood-at-6-5-billion-in-the-first-three-months-of-2022-a-rise-of-19.html

Replacement and off road segment seem to be doing well per above - key focus for BKT as well, price hike augurs well for BKT as in Q3 they did mention that future price hike is basis comepetetive scenario, ket monitoable given margin hit in last few qtrs.

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Inflation has taken a heavy toll on BKT this quarter. While the core revenue growth is ~36%, the operating profits have degrown by 1%. Volume growth strong at 13%

PBT margins are down from 28.3% to 20.5% YoY

Freight costs have gone up from 8% of the total expenses to 17% for this quarter (was 12% in the last quarter). Guess they have done reasonably well on the raw material front, will have to wait for the management commentary! The oh so criticized backward integration of carbon black looks sensible in hindsight

Old Waluj plant revamp capex (350 crores) on hold. Management says this is done to facilitate quicker production schedule demanded by end customers. Volume addition from this was seen at 25000MT p.a

Volume achieved for FY22 - 2.89 lakh MT (exceed expectations)

Revised volume guidance for FY23 stands at 3.2 lakh -3.3 lakh MT (was 3.6 lakh MT)

BKT-Q4FY22
Investor presentation

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I can see BKT logo in IPL jerseys. Looks like they are spending heavily in A&P. But why should a B2B company spend in A&P that much?

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The management is of the opinion that the growth in India is due to the recent spending on brand-building (IPL predominantly).

During the last year’s IPL, they had invested in the electronic billboards inside the stadium but this year they have gone further and have tied up with eight teams (excluding CSK and RR).

A quick look at the asp spends for the past six years shows that they have increased from 3% to 6% of revenues

image

As our geography contributes less than 20% of the overall pie for BKT, the incremental growth is coming at a high cost. Well… this is at least better than banking everything on Sunny Deol :sweat_smile:

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Average results from Balkrishna

  • Revenue increased by 45% YOY

  • Material and freight costs have grown significantly more than revenue growth

  • Net profit at 320 Cr- Down 3% YOY

  • Operating margin has come down to 12% lowest in couple of years

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Hello @Dev_S
Share price is more than 20% down from it’s high , any specific reason , even when all tyre companies are performing reasonably well. How badly its revenue will get impacted do to recession in Europe??

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Answer likely lies in Q1 commentary, where in falling rubber prices would see some destocking + slowdown in EU etc, and some impact on Q2 though margin should improve H2 onwards helped by lower freight. My sense is that subdued commentary and regular newsflow from EU on drought/ inflation/ economy challenges have given enough reasons to market for treating them the way most EU facing companies are.

While things may improve from Q3 onwards here on for BKT atleast on margin front but we will have to wait till price action or mgmt commentary comes in, markets are more focused on rewarding local tyre mfg companies where end auto industry is showing signs of strength.

Trimmed to tracking positions post Q1 results

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  1. RM cost has gone up. In last con-call, management guided that it will remain high until Q4 atleast. They have forward contract rates with RM suppliers till Q4, so even if cost drops for industry, it will not benefit BKT till Q4 when they will be able to revise the rates.
  2. Europe is going through their biggest drought in last 500 yrs. This has direct impact on farming and therefor on tractor sales. This is expected to impact BKT - new as well as replacement demand.
    Market seems to be reacting to this pressure on both demand and supply side.
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Request to guide about one query.
While reading Annual Report of Fy22,I came across the investment of BKT in unquoated shares of NSE Ltd and Care insurance co. And also preference shares of Tata capital and some other companies. Since these investments are unrelated to the core business of BKT, why they must be holding these shares? And are they allowed to do so? What must be the rationale behind it?

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