LIC-Backed Large Cap Auto Stock Declares 200% Interim Dividend; Buy?

Balkrishna Industries is a large-cap company in the consumer discretionary sector. For over 30 years, the company has been a global leader in the off-highway tire industry. The company has declared financial results for the quarter ended 30th September 2023 along with an interim dividend of 200% for FY24.

Balkrishna Industries Dividend

"The Board has declared 2nd interim dividend of Rs. 4.00 per Equity Share (200%) on the Equity Shares of Rs. 2/- each (face value) for the financial year 2023-24. And the payment thereof shall be credited/dispatched within 30 days from the date of declaration as per applicable provisions of Companies Act, 2013, to such shareholders as on Record Date i.e. 31st October, 2023," said Balkrishna Industries in a stock exchange filing.

Balkrishna Industries Q2 Results

The company reported revenue from operations of Rs 2,226 Cr in Q2FY24 compared to Rs 2,704 Cr in Q2FY23 and Rs 2,120 Cr in Q1FY24, representing a YoY fall of 17.67% YoY but QoQ gain of 5%.

Balkrishna Industries said its total income dropped 20% YoY to Rs 2,247 Cr in the quarter ended 30th September 2023 compared to Rs 2,806 Cr in the year-ago quarter. In the June 2023 quarter, its total income was Rs 2,115 Cr representing a QoQ gain of 6%.

The company's EBITDA reached Rs 548 Cr in Q2FY24 down by 3% YoY from Rs 564 Cr in Q2FY23 and in Q1FY24 its EBITDA stood at Rs 487 Cr marking a QoQ gain of 13%.

The net profit of Balkrishna Industries stood at Rs 335 Cr in the quarter under review down by 17% YoY from Rs 404 Cr in the year-ago quarter, but sequentially its net profit gained 7% QoQ from Rs 312 Cr in Q1FY24.

Commenting on the performance, the management of Balkrishna Industries said "In Q2, the Company faced challenges on account of heat waves and recessionary fears in export markets. While the inventory related challenges in international markets have normalized, the confidence levels in distribution channel is moderate, leading to a gradual and slow improvement.

India markets continues to perform relatively better. The volumes in Q2 were partly contributed by the inventory created in June 2023 but could not be shipped out, due to Biparjoy disruptions. Q2 also saw normalization of raw material cycle which is evident in the improvement in margins on a QoQ basis."

"Company had estimated a capex spend of Rs. ~600cr for FY24. Out of this, routine maintenance capex was estimated to be at Rs. 250-300cr. Given the aspirations of growth and better control over quality, the Company has decided to set up a mould manufacturing capacity.

This will be a standalone new project at Bhuj entailing a capex spend of Rs. 300 crores. This should get commercialized by end of Q1FY25. Therefore, the capex spends would be ~Rs. 900crores for FY24. Overall, the Company expects stable trajectory to continue and better H2FY24. However, given the H1FY24 related challenges and volume performance, company expects FY24 volumes de-grow marginally," they said in a report.

Balkrishna Industries Share Price Target

Ameya Ranadive CMT, CFTe, Equity Research Analyst at Choice Broking said "Balkrishna Industries Limited (BALKRISIND) is currently trading at 2533, and it has recently witnessed some profit booking in the week preceding its upcoming results. Over the past four months, the stock has demonstrated a commendable consolidation phase, establishing a robust support zone between 2450 and 2370. This period of consolidation is indicative of a matured base formation, signifying potential resilience against short-term fluctuations."

"Moreover, BALKRISIND has exhibited a promising technical picture. It has successfully closed above its short, mid, and long-term moving averages, including the 50-day, 100-day, and 200-day Exponential Moving Averages (EMA), showcasing strength across multiple timeframes. The Relative Strength Index (RSI) is currently positioned at 50, indicating a balanced momentum with room for further price appreciation," the equity research analyst of Choice Broking said.

"Furthermore, the Average Directional Index (ADX) stands at a moderately strong level of 20, underscoring a steady and sustainable trend in the stock's movement. This suggests a stable underlying trend, potentially poised for an upward surge. Anticipating a breakthrough above the 2580 level, we may witness a notable uptick in Balkrishna Industries. In the short term, there is potential for the stock to ascend to the range of 2680 to 2720. This anticipated movement is substantiated by the prevailing technical indicators and the solid consolidation base, making the aforementioned price targets well within reach," the analyst further added.

"In conclusion, with a solid foundation, robust moving average performance, balanced momentum, and a sturdy ADX reading, Balkrishna Industries appears well-positioned for a bullish trajectory. Traders and investors may find this an opportune moment to consider potential long positions, keeping a close eye on the critical breakout level of 2580 for confirmation of the anticipated upward movement," Ameya Ranadive claimed.

Balkrishna Industries Share Holding Pattern

During Q2FY24, the company reported promoter shareholding of 58.30%, FIIs stake of 12.53%, DIIs stake of 21.11%, Govt stake of 0.10% and public stake of 7.94%. As per the shareholding pattern of Balkrishna Industries for the quarter ended 30th September 2023, insurance giant LIC held 90,97,108 shares or 4.71% stake in the company.

Disclaimer

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