Stock to buy today, thursaday– 26th October : Balkrishna Industries Ltd(Rs.2531)

Balkrishna Industries Ltd (BKT) have posted a strong performance in Q2FY2024, with reported EBITDA at Rs 518 crore. The company anticipates a steady demand in second half of the fiscal year. Sharekhan retains a "" Hold rating on BKT with a revised price target of Rs 2720, a demand revival in long term and improved EBITDA margins."

BKT's stock trades at an  EV/EBITDA multiple of 14.9x  and a P/E multiple of 23.6x.

Highlights:

Q2FY2024 Performance

BKT reported Q2FY2024 EBITDA of Rs 518 crore, exceeding the estimated Rs 509 crore.
Revenue increased by 5.0% q-o-q to Rs 2226 crore, supported by a 5.0% q-o-q rise in volumes.
After adjusting for forex gains, APAT raised by 10.2% to Rs 316 crore.
BKT reported a second interim dividend of Rs 4 per share in addition first interim dividend.

EBITDA margin expanded by 60 bps q-o-q to 23.3%, driven by a 100 bps reduction in other expenses.
H1FY2024 Volume Performance

Total volumes in H1FY24 are impacted by destocking in a export markets.
Segmentwise volume breakup percentage: Agriculture (58.2%), OTR (38.5%), Others (3.3%).
Channelwise volume breakdown: Replacement (71.5%), OEM (26.5%), Others (2.0%).
Geography-wise volume breakdown: Europe (45.1%), America (16.6%), India (28.6%), RoW (9.7%).
Capex and Expansion

BKT raised its capex guidance from Rs 600 crore to Rs 900 crore for FY24, primarily for a new project focused on mold manufacturing capacity.
An investment of Rs 300 crore has been allocated for mold manufacturing, aiming to enhance the number of SKUs and product quality control.
The company has already completed a capex of Rs 595 crore in H1FY24.
The advanced carbon black project was progressing, would  be completed by H2FY25.

Indian Market Growth

BKT have started to the Indian market and has gained a 4-5% market share over the past 6 years.
The company will achieve a 10% market share in the domestic market.
The management believes that Indian market offers margins similar to those of its global business.

Overseas Demand Trends

BKT have  improved volume trends in H2FY2024 compared to H1FY2024.
Ongoing geopolitical issues continue to create uncertainty despite normalization of inventory levels to 2-3 months.
BKT's strategic outlook and performance and  indicate potential for stability and growth.