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.