Balkrishna Industries - India’s Off-Highway Tyre Exports On Gradual Recovery Path: ICICI Securities

ICICI Securities Report

Post stocking up of off-highway tyre inventory at distributor level in end markets between Mar-July 2022, India’s OHT exports from Aug-22 were muted as a result of destocking amid improving container availability.

OHT exports from the country bottomed out in Oct-22 at ~$130 million versus Mar-July 2022 average of ~$170 million and recovered to a five-month high of $152 million in Dec-22.

For Balkrishna Industries, as against its long-term average share of India’s OHT exports at ~50%, it expanded to ~59% in H1 FY23, likely driven by excess stocking at the dealer level.

Company’s OHT exports then saw a sharp reversal in Q3 FY23 with mean reversion in inventory levels taking the share down to ~40%. We believe Q3 FY23 was an outlier quarter in terms of volume/share as Balkrishna Industries had to undergo aggressive destocking.

Dec-22 OHT exports were up 6% month-on-month driven by improvement in agri OHT segment, though down 9% YoY. India’s OHT exports in 9M FY23 were up ~8% with the ~15% decline in the Europe getting balanced by growth in U.S. and rest of world.

We are building-in 8%/10% volume growth for Balkrishna Industries in FY24E/FY25E with Ebitdam at 24.5%/26.5%, respectively.

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