Nirmal Bang has initiated coverage on Balkrishna Industries (BKT) with a “Sell” rating and a target price of ₹2,418 per share, representing a potential downside of 17% from the current market price of ₹2,895. Nirmal Bang has highlighted concerns over weak demand and rising competition in the global Off Highway Tyre (OHT) market.
Nirmal Bang’s caution stems from the uncertain global demand for OHT, driven by erratic weather conditions in Europe and ongoing geopolitical uncertainties. The brokerage also highlighted increasing competition from low-cost producers in India and the narrowing pricing gap with multinational corporations, which could limit BKT’s ability to gain additional market share.
The note also pointed to margin pressures, with expectations that BKT’s margins will stabilize around 26% by the end of FY27. Additionally, higher capital expenditure for expanding Off-the-Road Tyre (OTR) capacity, as well as investments in carbon black and mould facilities, are expected to constrain the company’s return ratios.
Nirmal Bang projects a 6.5% volume CAGR for BKT over FY24-FY27, constrained by weakness in end consumer markets. While recognizing BKT as a strong franchise with competitive advantages due to its low-cost operations, the brokerage believes that prolonged demand weakness and increasing competition could negatively impact volumes and realizations.
The brokerage has valued BKT at 24 times its estimated earnings per share for June 2026, applying a 15% discount to the company’s five-year mean multiple. According to Nirmal Bang, any expansion in valuation multiples would depend on improvements in return ratios and the company’s ability to achieve pricing power alongside volume growth.
