Buy Balkrishna Industries; target of Rs 2675: ICICI Securities

Moneycontrol • 9 days ago

Original source

Key Investment Pillars

  • BKT's partnership with Pirelli Tyres provides a capital-efficient route to scale up its presence in the on-road tyre segment, leveraging existing capacity.
  • The association with a globally renowned premium brand could enhance BKT's brand perception, validate manufacturing capabilities, and facilitate faster acquisition of dealer partners.
  • BKT expects to earn conversion margins from the arrangement and maintains its medium-term margin target of 21-23%.
  • Management believes the partnership could strengthen market perception of BKT's manufacturing capabilities and product quality.

Thesis Validation Checklist

  • Observable signals to validate the thesis include the commencement of offtake for Pirelli tyres in 2027, gradual scaling of volumes to 800k PCR tyres p.a. by 2030, and improvement in BKT's brand perception and market share in the on-road segment.
  • Investors should watch for the company's ability to maintain its margin target, successfully ramp up its Bhuj facility, and expand its distribution network.
  • Risks to the thesis include higher-than-expected competition in the domestic TBR/2W tyre/PCR segment and further increase in raw material costs.