Shares of Balkrishna Industries have failed to perform this year. The stock is down 15% year-to-date (YTD) as of November 24 closing against a 7% gain in the benchmark Sensex.
The stock hit its 52-week high of ₹2,536.75 on January 18, 2022, and lurched sharply lower to hits its 52-week low of ₹1,681.95 on March 7, 2022. At present, the stock is down 22% from its 52-week high level and nearly 18% up from its 52-week low level.
For the September quarter of FY23 (Q2FY23), the company reported its consolidated revenue from operations to the tune of ₹2657.52 crore against ₹2072.23 crore in the corresponding quarter a year ago.
Consolidated profit for the period stood at ₹382.26 crore against ₹391.03 crore in Q2FY22.
Let's take a look at what the fundamental and technical factors are indicating about the stock.
Brokerage: ICICI Securities
The brokerage firm has a buy call on the stock with a target price of ₹2,479, implying 25 times FY24E EPS (earnings per share).
Balkrishna Industries reported strong demand trends in its key overseas markets with overall Q2FY23 exports revenue being up 25% year-on-year (YoY) in dollar terms against the industry exports (up 5% YoY).
The data indicates growth momentum in OTR (off-the-road tire) segment exports (up 10% YoY) and steady agri demand (up nearly 3% YoY) despite adverse market conditions in target geographies and supply-chain issues.
Data continues to support robust demand momentum driven by both agri and OTR segments (H1FY23 industry exports in US dollar are up nearly 16% YoY), on a strong base of H1FY22.
"We believe the benefit of new contracts of containers at lower rates and lag effect of lower raw material costs could aid the company's EBITDA margin to revert towards 24-25% levels Q4FY23 onwards, over and above delivering nearly 5% volume growth in FY23," said ICICI Securities.
"Better cost arbitrage, rising focus on improving OTR market share and scaling up of large diameter tyres are driving our revenue growth assumption of nearly 16% CAGR over FY22-FY24E (nearly 9% volume CAGR).
Analyst: Jigar S. Patel, Senior Manager - Equity Research, Anand Rathi Share and Stock Brokers
Since August 2022, this counter has fallen about 26%. At the current juncture, it has stabilized near its historical support of ₹1,800-1,820.
Also, during the entire fall, the volume was drying up which is an anomaly (refer to the chart below). From the candlesticks pattern perspective, on November 15, 2022, it made a bullish engulfing pattern along with heavy volume, thus indicating a reversal in the counter.
From the Indicator perspective, the daily 21-day ROC (rate of change) has turned positive, further confirming the upside in the counter.
"One can buy in small tranches at the current levels and buy another at around ₹1,900 level. The upside target is expected to be ₹2,100 and expected support is seen around ₹1,875," said Patel.
Analyst: Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher
The stock has been moving within a range consolidating near the ₹1,900 and 1,960 zone. It maintained above the support zone of the channel pattern on the daily chart and just moved above the significant 50EMA level of ₹1,960 to improve the bias.
"We suggest holding and accumulating with support maintained near ₹1,890 and anticipate an upside move in the coming days. The overall bias is positive and a decisive move past the significant 200DMA level of ₹2,070 would further strengthen the trend," said Parekh.
"Stay invested and expect an upside potential target of ₹2,220-2,250, keeping the support zone at ₹1,890," Parekh said.
According to a MintGenie poll, an average of 23 analysts have a ‘hold’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.