Balkrishna Industries OHT recovery and tyre expansion support growth despite margin headwinds

Investment View

Geojit Investments Limited has upgraded Balkrishna Industries Ltd. (BKT) to BUY with a target price of Rs 2,547, compared with the current market price of Rs 2,201. The broker’s June 4, 2026 report views Q4FY26 performance as reinforcing the resilience of BKT’s core off-highway tyre franchise.

Recovery in overseas markets and continuing strength in India support a healthier volume outlook. Geojit also expects the expansion of the on-highway portfolio and the scale-up of the carbon black business to diversify revenue streams and strengthen the operating platform over time.

Q4FY26 and FY26 Financial Performance

In Q4FY26, consolidated revenue rose 6.6 per cent year-on-year to Rs 2,933 crore and increased 7.2 per cent quarter-on-quarter, supported by a 5 per cent year-on-year increase in sales volume to 85,820 MT. EBITDA rose 4.3 per cent year-on-year to Rs 640 crore but declined 0.5 per cent sequentially.

EBITDA margin narrowed by 50 basis points year-on-year to 21.8 per cent and by 170 basis points quarter-on-quarter, as raw-material expense increased 11.6 per cent year-on-year and other expenses increased 18.9 per cent. Reported PAT declined 18.7 per cent year-on-year to Rs 299 crore, owing to an adverse movement in other income.

For FY26, revenue grew 3.6 per cent to Rs 10,823 crore, while EBITDA fell 6.4 per cent to Rs 2,300 crore and adjusted PAT declined 24.9 per cent to Rs 1,243 crore.

Demand Recovery and Pricing Actions

Management stated that raw-material prices rose 4–5 per cent in Q4FY26 and expected a further 7–8 per cent increase in Q1FY27. BKT has raised prices by 3–5 per cent and plans a further 2 per cent increase to offset cost inflation.

• Europe and the Americas improved in the second half of FY26 as channel inventories normalised.
• India remained the strongest market, supported by sustained growth momentum.
• BKT intends for the US to again contribute 10 per cent of total sales volume in FY27.

Portfolio Expansion and Capital Expenditure

BKT is broadening beyond its core off-highway segment through entry into truck and bus radial tyres, the relaunch of two-wheeler tyres and a planned passenger-car radial tyre rollout by the end of calendar year 2026.

The Board approved additional capital expenditure of Rs 2,000 crore, taking planned capital expenditure through FY29 to Rs 6,800 crore. The spending will support capacity expansion, automation and sustainability projects. FY27 capital expenditure is estimated at Rs 1,500–1,800 crore, in addition to annual maintenance expenditure of about Rs 200 crore.

Estimates and Valuation

Geojit reduced its FY27E revenue forecast by 4.0 per cent to Rs 12,771 crore, EBITDA forecast by 17.9 per cent to Rs 2,789 crore, adjusted PAT forecast by 26.8 per cent to Rs 1,515 crore and EPS forecast by 26.8 per cent to Rs 78.4. The FY27E EBITDA margin estimate was cut by 370 basis points to 21.8 per cent.

For FY28E, Geojit forecasts revenue of Rs 14,942 crore, EBITDA of Rs 3,382 crore, an EBITDA margin of 22.6 per cent, adjusted PAT of Rs 1,882 crore and EPS of Rs 97.4. The target price of Rs 2,547 is based on 26 times FY28E adjusted EPS.

Key Risks

• Rising raw-material prices.
• Higher freight costs.
• Geopolitical supply-chain disruption.

Geojit expects pricing actions to gradually mitigate the impact of these pressures.