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Brokerage firm HDFC Securities has maintained its ‘Reduce’ rating on Balkrishna Industries Ltd. despite a promising outlook for the financial year 2025.
The company’s Q2 FY24 profit after tax met estimates at Rs 3.3 billion, and margins increased by 140 basis points quarter-over-quarter (QoQ) to 24.4%. This improvement is attributed to an enhanced product mix and favorable currency conditions.
However, the recovery in global off-the-road tyre demand is expected to slow due to geopolitical turbulence and reduced H1 tonnage sold, leading to a marginal year-on-year volume decline in FY24.
Looking ahead, the company anticipates a strong 14% year-on-year growth in tonnage for FY25, coupled with operating leverage benefits. It also expects a hedge rate of Rs 93 for 25% of potential exports, even amidst rising crude prices. These factors are projected to contribute to a further margin improvement of 220 basis points to 27%.
Despite these positive projections, HDFC Securities has maintained its ‘Reduce’ rating due to overvaluation at 27.4 times FY25E. The target price has been revised to Rs 2,201/share from Rs 2,148 per piece earlier.
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