Shares of Balkrishna Industries, an off-highway tyre manufacturer, have corrected 27 per cent from its 52-week high level. While the scrip has made a few attempts to recover in the last few months, but failed to carry the momentum forward.
The stock hit a 52-week high of Rs 2,639.25 on October 18, 2021, and a 52-week low of Rs 1,681.95 on March 07, 2022.
Notably, long-term investors have made strong gains on this counter, as the scrip surged nearly 1,200 per cent in the last ten years.
Hem Securities believes Balkrishna Industries as a company will keep performing well over the next few quarters, due to the robust demand environment. It believes the company’s export-oriented business model, labour cost benefits and aggressive marketing may help it outperform its peers.
The brokerage said tyre exports have witnessed a noticeable increase in the current year, owing to increased acceptability of Indian tires in abroad markets, and healthy demand from destinations such as the United States and European countries.
Motilal Oswal believes that the impact of raw material (RM) cost increases will continue in the second quarter of FY23. The brokerage house expects volumes for Balkrishna Industries to grow with the commencement of production at its Bhuj plant. It has a ‘Neutral’ rating on the stock with a target price of Rs 2,125 per share.
Hem Securities has a ‘Buy’ rating on the stock with a target price of Rs 2,293 per share.
As far as the tyres sector goes, B&K Securities expects revenues to see sequential de-growth in the range of 0-2 per cent in the domestic market. The price hikes of around 2 per cent taken during the quarter, strong OEM production and scaling up of expanded capacities are expected to partially offset a marginal drop in replacement segment volumes, it said.
“Investors are recommended not to accumulate the stock at current levels. They can wait for levels of Rs 1,745 with a stop loss of Rs 1,623 and first target at Rs 2,304 and the second target at Rs 2,511,” Manoj Dalmia Founder and Director-Proficient Equities told Business Today.
Sharekhan said it is difficult for the company to achieve its volume guidance, given the rise in business risks for the Europe region.
“The rising concerns over Europe’s climatic conditions, led by the severe heat wave and drought, is expected to impact Balkrishna’s Europe business, which constitutes over 55 per cent of its overall revenue,” it said in a recent note.
Having built in the impact of Europe concerns, the brokerage has reduced Balkrishna’s FY23 andFY24E earnings estimates by 15.9 per cent and 18.8 per cent, respectively. It has downgraded its rating on the stock to ‘Hold’ with a reduced-price target of Rs 2,163.
At 13:40 hours, shares of Balkrishna Industries were trading 1 per cent lower at Rs 1896.70. At this price, the market cap of the company stood at Rs 36,666.47 crore.
