Summary of earnings call for Balkrishna Industries Ltd-$ published on 01 Aug, 2025

Balkrishna Industries Ltd.
Q1 FY26
Call date · July 28, 2025

1 · Management Commentary

Key Positives

• Sales volume of 80,664 metric tons, demonstrating resilience despite global headwinds.
• India business contributed approximately 35% to sales volumes, with 14.4% YoY growth.
• Capex projects (OTR, Carbon Black, PCR, CVR) progressing as per schedule.
• Outperformed industry amid volatile international markets.
• Interim dividend of INR4 per equity share declared.

Key Negatives

• Marginal decline in overall sales volume YoY.
• Gross profit margin lower due to product mix and higher India contribution.
• Stand-alone EBITDA margin at 23.8%, impacted by partial absorption of US tariffs and lower fixed cost absorption.
• Profit after tax at INR287 crores, down ~40% YoY, primarily due to M2M loss of INR154 crores.
• Europe sales declined 20% YoY; weak farmer sentiment and macro environment.

Forward Guidance

• Capex of INR3,500 crores over next 3 years; no breakup shared, all projects on schedule.
• Commercial production for PCR and TBR expected June–July 2026.
• Advanced Carbon Black and rubber track expansions in trial/testing; ramp-up expected by end of calendar year and H2 FY26, respectively.
• Margin guidance maintained at 24–25% EBITDA.
• Distribution network for new segments (PCR/TBR) to be largely newly built; 5% market share target by 2030.
• Too early to provide volume guidance; outlook remains cautious amid tariff and macro uncertainties.

2 · Q&A Highlights

Q 1 (US Tariffs & Impact): How are US tariffs affecting business, and what is the cost-sharing arrangement with customers?
A (Management):
• Current US tariff is 10%, with 60% borne by customers and 40% by BKT; this arrangement continues for Q2.
• Tariff impacted nearly the whole quarter; future approach depends on final tariff structure.

Q 2 (Europe Market & Inventory): What is the outlook for Europe and is there any inventory correction?
A (Management):
• Europe remains weak due to macro and farmer sentiment; no specific inventory correction, just overall market sentiment.

Q 3 (Capex & New Segments): Can you provide details on capex allocation and new product launches?
A (Management):
• INR3,500 crores capex over 3 years; no segmental breakup shared.
• PCR and TBR commercial production to start June–July 2026; all expansions on track.

Q 4 (Margins & Realizations): What is the margin outlook and impact of product/geography mix?
A (Management):
• Margin guidance maintained at 24–25% EBITDA.
• India sales realization is 8–10% lower than international; margin impact is 0.5–1% lower at EBITDA level.

Q 5 (Carbon Black & Rubber Tracks): What is the status and contribution of Carbon Black and rubber track businesses?
A (Management):
• Carbon Black is ~9% of sales; advanced Carbon Black and tracks are in trial stage, ramp-up expected by year-end/H2 FY26.

Q 6 (Dealer Network & Distribution): How will distribution for new segments be managed?
A (Management):
• Existing network has ~70 distributors; new PCR/TBR distribution will be largely built afresh, with some overlap.

Q 7 (Hedging & Forex): What is the hedging policy and impact on forex losses?
A (Management):
• Hedge 80% of net receivables (30–35% of gross euro revenue); no dollar hedging as it is naturally hedged.

Q 8 (Market Share & Strategy): How will BKT compete in new segments with established players?
A (Management):
• Focus remains on Off-Highway; entry into premium/radial categories with operational advantages to maintain margins.

3 · Other Key Numbers

• Sales volume: 80,664 metric tons
• Stand-alone revenue: INR2,759 crores (includes realized forex loss of INR1 crore)
• Stand-alone EBITDA: INR655 crores; EBITDA margin: 23.8%
• Profit after tax: INR287 crores (down ~40% YoY)
• M2M loss: INR154 crores
• Interim dividend: INR4 per equity share
• India sales: 35% of volumes; 14.4% YoY growth
• Europe sales decline: 20% YoY
• Euro-INR hedge rate for Q1: INR93.60
• Carbon Black: ~9% of total sales
• Dealer network: ~70 distributors
• Dealer inventory (export): 2–3 months
• US tariff: 10% (BKT absorbs 40%)
• Capex plan: INR3,500 crores over 3 years
• Target market share for rubber tracks: 3–5%
• Margin impact of India mix: 0.5–1% lower at EBITDA level
• Realization in India: 8–10% lower than international markets

Note: This is an AI generated summary of the earnings call. There may be inaccuracies in the summary. Please refer to the original transcript before making investment decisions.