Balkrishna Industries Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Balkrishna Industries Ltd (BALKRISIND) Q2 FY24 Earnings Concall

• Financial Results and Performance
  • Revenue INR2247 crore, EBITDA INR548 crore with 24.4% margin, PAT INR335 crore.
  • For H1, 45% sales from Europe, 29% from India, 17% from Americas.
  • Q2 faced challenges due to heatwaves and recessionary fears in export markets.
  • Inventory-related challenges normalized, but confidence in distribution channels is still moderate.
  • India market continued to perform relatively better.
  • Q2 volumes partly from inventory created in June that couldn’t be shipped due to disruptions.
  • Expect stable volumes but de-growth in FY24 due to H1 challenges.
  • Operating margins declined due to higher employee expenses, power and fuel costs, and other expenses.
  • Profitability was impacted by inflationary pressures on costs as well as muted growth.
• Capex and Expansion
  • Planned capex of INR600 crore for FY24, with INR 250-300 crore for maintenance.
  • Decided to set up new mould plant at Bhuj instead of expanding Dombivali plant.
  • New plant at Bhuj a standalone project with capex of INR300 crore and is to be commercialized by end of Q1 FY25.
  • Total FY25 capex now at about INR 900 crore.
  • Advanced Carbon black project to be commissioned in H2FY24.
  • Carbon black project to generate INR400-600 crore revenue at full capacity.
• Demand Environment
  • Seeing gradual recovery in Europe, but uncertainty due to geopolitics.
  • Strong growth continuing in India across agri and OTR segments.
  • Overall global demand likely to decline marginally in FY23.
• Capacity Expansion
  • Brownfields allow faster implementation in 15-18 months.
  • To support new products like large OTR and solid tires.
  • No immediate need seen given utilization levels.
  • Truck and bus radial capacity expansion is underway and expected to be completed by Q4 FY23.
• Market Share
  • Current share is 4-5% globally and in India.
  • Aiming to increase it to 10% over time in India in the medium term.
  • Has strong presence in regions like Punjab and Haryana and working to increase presence and market share in other regions as well.
  • Growth to come from new products like solid tires and tracks.
  • Entered two-wheeler segment this year, received good response from OEMs.
  • Expects international markets to pick up in H2 FY24.
• Pricing Actions and Margin Outlook
  • Raw material costs likely to remain stable or see minor increases.
  • Continuing to take price hikes to offset commodity cost inflation.
  • Have not taken any price hikes this quarter due to lag effect of RM price changes.
  • Will reconsider price hikes if there are sharp RM price movements.
  • Taking actions to maintain EBITDA margin between 26-28%.
  • Expect margins to remain sustained at current levels.
• International Markets
  • International markets facing headwinds from geopolitical tensions and uncertainty.
  • Performance in Americas and rest of the world has been declining over the past few quarters.
  • Company waiting to see how international markets progress before providing clarity.