Why Did Balkrishna Industries Shares Zoom 10% Today?

Shares of Balkrishna Industries surged over 10% to hit a record high of Rs 2,138 per share on the BSE in intra-day trade today after the company reported robust March quarter (Q4FY21) numbers.

The stock of the auto tyres & rubber products maker surpassed its previous high of Rs 1,965.9, logged on 12 May 2021.

Financial Highlights

Balkrishna Industries on Friday reported a 45% increase in consolidated net profit to Rs 3.7 bn for the fourth quarter ended March 2021.

The company had posted a profit of Rs 2.6 bn in the January-March period a year ago.

Revenue from operations climbed 28.7% to Rs 17.5 bn during the quarter under review as against Rs 13.6 bn in the year-ago period.

For the full financial year 2021, the company's revenue from operations stood at Rs 57.6 bn, up 20.4% as against Rs 47.8 bn in the last year.

On a consolidated basis, earnings before interest, tax, depreciation, and amortisation (EBITDA) came in at Rs 5.6 bn for the quarter under review, up by 37% over the same quarter last year. EBITDA for the fiscal year 2021 stood at Rs 18.1 bn and grew by 31% over last year.

The company's standalone revenue came in at Rs 17.5 bn, up 29% year on year (YoY), on the back of healthy volume growth.

The company achieved highest ever quarterly sales volume of 68,002 million ton (MT), up 17% YoY.

Key Highlights from Management Commentary

The management said the demand continues to be robust in agriculture segment across geographies.

In the other segments, demand has seen an uptick on back of increased commodity prices, infrastructure creation and pick-up in economic activity.

During FY21, the company faced multiple challenges related to raw material prices and its availability. Supply chain issues was also a big challenge especially post Suez Canal fiasco.

However, Balkrishna Industries has been able to withstand these challenges and emerged stronger by posting its highest ever annual sales volumes.

For FY22, the company is guiding sales volume between 250,000-265,000 MT. The company strongly believes that this demand trend is likely to continue in FY22 and years to come.

However, there may be covid 19 related softness in demand. Thus, they gave a wider range for annual guidance.

According to a leading financial daily, Balkrishna Industries continues to deliver on growth parameters while maintaining its anti-commodity characteristics (lean B/S, high profitability, double-digit return ratios).

Q4FY21 volumes were the highest ever at 68,002 MT, with the company guiding for around 10-17% YoY tonnage growth to 2.5-2.7 lakh MT in FY22E.

Backward integration via carbon black plant provides a natural cost hedge, with long-term margins seen remaining in the 28-30% range.

Equity Dividend

The board of directors have recommended a final dividend of Rs 5 per equity share subject to shareholder approval at ensuing annual general meeting (AGM), in addition to Rs 12 per equity share paid for 9MFY21.

The total dividend paid will be Rs 17 per equity share that is 850% of face value (face value - Rs 2 each).

Company's Resilient Business Model

Balkrishna Industries has built a resilient business model and is confident to withstand the near term challenges to emerge stronger with a higher global market share.

The company reported to be long term debt free with cash and cash equivalents of Rs 14.8 bn as on 31 March 2021.

It has diversified product portfolio, spread across agriculture, industrial, construction, earthmoving, mining, port, lawn and garden, and ATV tires.

The company is self-reliant in carbon black and has multiple sourcing arrangements for other raw materials.

Balkrishna Industries Capex Program of Rs 19 bn

Brownfield Tire Plant: Debottlenecking and brownfield expansion along with addition of balancing and ancillary equipment at Bhuj.

Expansion to add 50,000 million tons per annum (MTPA) capacity; expected completion by the second half of FY23. Capex cost for the plant will be up to Rs 8 bn.

After thew brownfield capex, the achievable capacity of tire plant will stand at 3.4 lakh MTPA.

Carbon Black and Captive Power Plant: Current achievable capacity at 1.2 lakh MTPA.

With successful addition of new customers, carbon black capacity is planned to be increased to 2 lakh MTPA including 30,000 MTPA of high value advanced carbon material and power plant.

Facility will allow larger control over supply chain while fulfilling internal demand on expanded capacity of tires and meeting increased demand from third parties.

Capex cost of up to Rs 6.5 bn; expected completion by the first half of FY23 (H1FY23).

Modernisation, Automation, and Technology Upgradation: Modernisation, automation, and technology upgradation of certain existing equipment and install automated material handling systems.

Capex to be undertaken at existing facilities at Rajasthan and Bhuj leading to improvement in quality and efficiency.

Capex cost of up to Rs 4.5 bn; expected to be completed by H1FY23.

How the Stock Markets Reacted to Balkrishna Industries Q4FY21 Numbers Today

Shares of Balkrishna Industries opened the day at Rs 1925 on the BSE and Rs 1920 on the NSE.

Balkrishna Industries share price closed at Rs 2,081 (up 9.8%) on the BSE and Rs 2,083 (up 9.9%) on the NSE.

At its current price, it is trading at a P/E of 33.9.

The share also touched its 52-week high of Rs 2138 and 52-week low of Rs 677.6 on 17 May 2021 2021 and 23 March 2020.

Over the last 30 days, the Balkrishna Industries share price is up 29.5%. Over the last one year, the company's share price is up 124.9%.

About Balkrishna Industries

Headquartered in Mumbai, India, Balkrishna Industries (BKT) is engaged in the business of manufacturing and selling of Off-Highway Tyres (OHT) in the specialist segments such as agricultural industrial and construction earthmovers & port mining forestry lawn and garden, and All-Terrain Vehicles (ATV).

The company has a worldwide distribution network ensuring extensive reach and penetration. The company derives majority of its revenue from exports.

Balkrishna Industries has five state-of-the-art production sites in Aurangabad, Bhiwadi, Chopanki, Dombivali and Bhuj.

The company sells its products in 130 countries worldwide through a network of national distributors.

For more details about the company, you can have a look at Balkrishna Industries factsheet and quarterly results on our website.

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