Balkrishna Industries - Weakness To Linger For A Couple Of More Quarters: ICICI Securities

ICICI Securities Report

Industry off-highway tyre exports remained subdued in January 2023, closer to October 2022 lows, post spiking up in the seasonally strong December 2023. Overall OHT export revenues were down 9% YoY in Jan-23 (up 6% FY23-to-date) with the agri tyre segment down 12% YoY versus off the road down 3% YoY.

In Jan-23, exports to the Europe and U.S. declined 9% and 18% YoY respectively. Due to container shortages globally and ~five times increase in container prices early CY22, distributors stocked up excess inventory (~10% higher than retail demand) between March-July 2022.

The destocking exercise started in Aug-22 and we expect it to persist till Q1 FY24E, post which the quantum of exports should once again stabilise at ~$140 million-145 million/month.

Also, due to discontinuation of container surcharge rates getting passed on amid declining container rates, realisation levels for OHT exports, we believe, would have contracted by ~6-8% from Q2 FY23 levels. This would impact India’s monthly OHT export .

For Balkrishna Industries, we believe, post a subdued Q3 FY23, volumes should remain at sub-70 thousand tonne in Q4 too, with normalised 75 kte quarterly volumes coming only from Q2 FY24E onwards.

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