Should You Invest in Balkrishna Industries? The company gains 8% as Q4 results impress D-Street

In early trade on Tuesday, May 21, shares of Balkrishna Industries reached a record high of Rs 3034.95 per share on the BSE. After the firm released better-than-expected Q4 earnings and many brokerages changed their positions on the shares, buying in the stock occurred.

The shares increased 8% in early trading on May 21 to reach a new 52-week high.

The tire maker announced a staggering 87.4% rise in net profit, reaching Rs 486.8 crore from Rs 260 crore during the same time last year.

Strong revenue growth was also seen in the fourth quarter, with revenues of Rs 2,682 crore, up 16% from the same period in the previous fiscal year.

The board has suggested, subject to approval by the company’s shareholders at the next annual general meeting, a final dividend of Rs 4 per equity share (200%) on the equity shares of Rs 2 each (face value) for the year ending March 31, 2024.

In comparison to the Nifty50’s gain of more than 22%, shares of Balkrishna Industries have returned 22% in a year.

What Action Should Investors Take?

Nomura lifted the target price to Rs 3,230 from Rs 2,265 per share and upgraded the stock to “buy” from “reduce.” The firm thinks price increases and robust growth momentum will sustain profitability.

Additionally, the firm is starting a demand upcycle, which could spur demand for replacement products now that global agricultural prices have begun to rise. Furthermore, colleagues from across the world anticipated a rebound in the second half.

According to the brokerage, the company is about to embark on a demand upcycle, given that rivals globally are also expected to witness a rebound in H2FY25. Nomura predicted that price increases would sustain margins in the future and that Balkrishna Industries’ robust growth momentum would likely continue.

The firm’s performance for the quarter ended in March, according to Motilal Oswal, substantially exceeded its projections. Despite this, the brokerage maintained its neutral rating and raised its price target to Rs 2,535.

There is now a surge in retail demand in important international markets, and demand in India is still strong. The management did not, however, provide any volume growth projection for FY25 because of the current geopolitical concerns, which continue to cast doubt on the demand picture in important markets.

Citi and Kotak Institutional Equities, on the other hand, maintained their sell recommendations.

Kotak pointed out that because of the continuous global unrest, the company’s near-term picture is still uncertain. Shipments may be delayed as a result, thus putting pressure on profits.

Furthermore, values seem costly to domestic brokerages. Kotak’s target price for the share is Rs 2,175; this suggests a possible 22 percent decline.

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