Yes, they are “rock steady” in brand building only. My eyes were tired by seeing BKT logo in almost every IPL team jersey. Few started making meme on that.
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Not looking at 1-2 quarters… there market share is stagnant since last 5 years. You may check my previous comment Balkrishna Industries - #293 by meditate
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Correct. Industry doing well BKT share is same. Industry doing badly BKT share is same. At least this is the story last 5 years where they are not able to meaningfully differentiate themselves from competition. Lets hope things change FY23 onwards
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Balkrishna Industries Q2FY24 Concall Summary
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Kotak Daily 28-Nov-23.pdf (1.0 MB)
Kotak has retained the sell target on Balkrishna.
Valuations
What convinces me is the valuation comfort of the company is not favorable.
In the past, the PE has always peaked out around 40. At this point the PE is closer to 48 and PEG is nearing 7. The upside seems pretty limited. Also, technically closing in on previous high levels.
Business Outlook
The North America business which seems slow on recovery contributes only 17% of the business. Which means 83% should start working. I am a bit concerned, the tone of concall was still too cautious. Is there something missing ?
SoM Targets
Management has been speaking about achieving 10% SoM since a few years but there seems to be no clear strategy in terms of achieving the same.
Missing Guidance
Seems like a very general guidance of H2 to be better than H1.
Disc: Please do your own due diligence before taking any action. I have booked out on my positions based on the analysis above. Hence, it may be a biased viewpoint.
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You might be right though YOY we could see a big improvement and PE falling as last December quarter had poor results (eps 5.41).
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Yes. Completely agree with you Sidharth. This is just my thesis and markets have the power to prove it wrong.
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Logistics challenges at Red Sea transport channel now affecting big way to the export oriented companies. BKI is worried about that and based on con call, today market reacted negatively even though result is good.
Wait for correction in the fundamentally strong company getting affected due to supply chain disturbances to add/buy
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PE correction is happening much sharper after a prolonged time correction. A touch below 2100, its long-term support zone is more likely from where the stock gets more attractive again for long term positions.
Disc: Entered at current level and intend to add along the fall if it continues.
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Agree with your observation. A good set of numbers and price correction has made the PE correction aggressive.
In my opinion, all export oriented companies will continue derating till clarity on Red Sea operations is seen. BKT is primarily an export oriented company. Freight and Insurance costs will be a drag till they do not pass on the cost to customers.
Most of this impact will be felt in Q4’FY24 as the issue was raised E/Nov’23. So most of Q3 was reasonably stable. My plan is to wait and watch for Q4 results and then decide the way forward. Avoiding catching a falling knife. 
Disc: Please do your due diligence. Not an investment or sell advice.
Does an Increase in Natural rubber Price impact the margins of BKT?
Where does BKT source rubber from?
very good results from BKT.
Good improvement in profit margin
Q1FY25 Concall Summary
Business Updates
- The demand trends were healthy during the quarter but the growth in the quarter is also due to the lower base in the same quarter last year
- The environment in USA should remain tepid due to recessionary heawinds but the company should achieve minor volume growth in USA in FY25
- The tyre deliveries to European Union should confirm to new guidelines on deforestation on source of natural rubber from 31st December 2024
- The advanced carbon black project with capacity of 30000 MT is progressing as per schedule and the moulds plant is also progressing as per schedule
- The company will spends Rs 1300 crores in Bhuj to add capacity for OTR tyres of 35000 MT and this capex will be executed in phases
Participants
Nomura
Nuvama Wealth
Anand Rathi Institutional Equities
Equirus Securities
Ambit Capital
Incred Equities
Kotak Mahindra AMC
QnA
- The freight costs was lesser as the rates had been negotiated early but in the coming quarters the price of freight and RM both will be higher
- As of now there has not been any price hike and going forward demand seems weak so will wait before taking a decision on price hike
- The end user demand seems weak due to the various macro economic and geo political challenges persisting in the current environment
- The capex for FY25 will be between Rs 600-700 crores
- The channel inventories are also higher because of ongoing crisis in Red Sea due to which distributors have stocked up higher
- The acceptance for the 48 inch plus tires which are used in mining segment has been good and hence the new capex is primarily in the mining segment tires for radial tires
- The market share shall be maintained
- The sourcing of rubber should be from land where all local laws are being followed and has also not led to any deforestation since 2020
- The cost of rubber that is ethically sourced is costlier by around $300/MT and exports to European Union need to adhere to this sourcing
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They still hold about 42 lac shares as on 30th Sep as per the portfolio disclosure on their website
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