Key highlights from Balkrishna Industries Ltd (BALKRISIND) Q3 FY23 Earnings Concall
Q&A Highlights:
- [00:11:53] Binay Singh from Morgan Stanley asked about current inventory levels and its outlook. Rajiv Poddar Joint MD said that for RM the company would ideally like to be around 45 days and currently BALKRISIND is between 60-65 days. And the tire stock at dealer level has come down to around 2.5.
- [00:13:03] Binay Singh with Morgan Stanley also asked about the reason for biggest sequential volume drop in North America market. Rajiv Poddar Joint MD answered that it’s due to seasonality, but the company added that America is going well and it’s not overly concerned about it.
- [00:13:26] Binay Singh of Morgan Stanley queried about drivers of other expenses excluding freight cost going up sequentially. Rajiv Poddar Joint MD replied that it was due to some minor promotional activities that have been done, which have been accounted in 3Q23.
- [00:15:56] Arvind Sharma at Citi asked about realizations, if the decline is mainly attributable to the lower surcharge or a mix impact. Rajiv Poddar Joint MD clarified that it’s only due to the lower surcharge.
- [00:22:25] Siddhartha Bera from Nomura Capital asked if the expected reduction in coming quarters in freight cost would lead to drop in ASPs. Rajiv Poddar Joint MD replied that it would decline the ASPs consequently.
- [00:23:07] Siddhartha Bera from Nomura Capital asked about the capex for the first nine months and the outlook for FY24. Rajiv Poddar Joint MD answered that around INR1,300 crore has been done for nine months and some minor amounts will be done in 4Q23. For FY24, expectation is around INR300 crores.
- [00:27:15] Mumuksh Mandlesha of Emkay Global asked about the off-highway tire segment growth expectation. Rajiv Poddar Joint MD replied that it’s expected in the low single digit.
- [00:27:39] Mumuksh Mandlesha of Emkay Global enquired about the drivers of RoW region declining YoY. Rajiv Poddar Joint MD answered that it’s just due to the seasonal economic cycle factor.
- [00:33:39] Nishit Jalan with Axis Capital enquired about any price cuts happening as RM costs have come down sharply. Rajiv Poddar Joint MD replied that the company has not heard from its dealers of any price cuts so far.
- [00:36:55] Pramod Amthe of Incred Capital asked that since margins have been under pressure if the company would focus now on cost reduction. Rajiv Poddar Joint MD answered that BALKRISIND is always cautious about cost but once the volume increases, margins will surely come back.
- [00:40:02] Pramod Amthe of Incred Capital enquired about the contribution of South American market in overall volume currently. Rajiv Poddar Joint MD said that 90% of volumes contribute from Americas for nine months.
- [00:42:41] Priya Ranjan from HDFC asked about ramping up carbon black, the contribution seen from normal carbon black sales from the overall topline. Rajiv Poddar Joint MD answered that carbon black will be above 5% of topline and specialty will be sold outside 100%.
- [00:44:11] Aniket Mhatre from HDFC Securities enquired by when should BALKRISIND expect its margins to bounce back to 28-30%. Rajiv Poddar Joint MD replied that the company is working towards that. In the coming quarters BALKRISIND will have a meaningful recovery in EBITDA due to RM and freight cost declining. BALKRISIND expects it to be around 300 bp from current levels.
- [00:48:58] Prolin Nandu with Goldfish Capital enquired that over the medium term, what kind of market share gains can be assumed. Rajiv Poddar Joint MD answered it’s currently at 5-6% growth, and are aiming to reach 10%. It is difficult to say how much it will increase in the mid-term.
- [00:55:27] Saif Gujar from ICICI asked about any plans to increase the market share from India operations. Rajiv Poddar Joint MD replied that the company is actively trying to increase the margin in India. It will continue and it’s not a hedge against Europe or anything.