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News: Balkrishna Industries (BKT) reported robust performance in Q1FY25 and was a beat to street estimates. Standalone net sales for the quarter were at ₹2,690 crore, up 27% YoY amid tyre sales volume of 83,570 tonne, up 24% YoY. EBITDA margins in Q1FY25 came in at 24.2%, down 70 bps QoQ. PAT for the quarter stood at ₹477 crore, up 53% YoY, driven by healthy volume growth, margin expansion and high other income. It has announced new expansion plan wherein it aims to add 35,000 tonnes of capacity (mining tyres segment) at its Bhuj plant at a capital outlay of ~₹1,300 crore (to be done in phases).
View: The management sounded caution on growth prospects in near to medium term amidst global uncertainties. It now expects to grow marginally in terms of volume in FY25E vs. our baked in assumptions of ~9% volume growth. In addition to it, due to tepid demand environment it will now have to absorb higher costs both on front of Raw material (2-3% QoQ increase) as well as freight (from ~6% of sales to ~8% of sales) from Q2FY25 onwards. With such cautious management commentary and ensuing pressure on profitability, the stock lacks imminent triggers for an up move.
Impact: Negative