Balkrishna Industries regional OHT volume recovery drives FY27 growth and earnings upgrade

Investment View and Q1 FY27 Upgrade

Anand Rathi Research upgraded Balkrishna Industries to BUY and raised its target price to Rs2,950 from Rs2,400 in its August 2, 2026 result update. The upgrade reflects stronger-than-expected Q1 FY27 volumes, particularly in Europe, improved realisation and the broker’s expectation that a substantial part of the commodity-cost pressure is behind the company.

Anand Rathi expects revenue, EBITDA and adjusted profit after tax to grow at CAGRs of 21 per cent, 22 per cent and 28 per cent, respectively, over FY26-28E.

Strong Standalone Q1 FY27 Performance

Balkrishna Industries delivered a strong standalone Q1 FY27 performance, with revenue, volumes and adjusted profit exceeding Anand Rathi’s estimates. Revenue growth was supported by higher volumes and realisation, although EBITDA margin contracted because of increased input and employee costs.

Adjusted revenue was 11.1 per cent above Anand Rathi’s estimate and 10.1 per cent above consensus. EBITDA exceeded the broker’s estimate despite the margin contraction. Adjusted profit after tax was supported by stronger operating income and Rs1.2bn of other income, including mark-to-market effects.

Regional Growth and Management Outlook

India revenue grew 32 per cent year-on-year, Europe grew 16 per cent and Rest of World grew 15 per cent. America declined 16 per cent on a high base. Management indicated an improvement in demand across off-highway tyre end-markets and segments.

• In Europe, a good monsoon and a favourable base supported growth. Balkrishna Industries is working with channel partners to increase market share.
• In India, management expects superior products, marketing, new segments and infrastructure capital expenditure to support growth.
• In the Americas, management expects a 10 per cent tariff environment, a sharper go-to-market approach and a focus on high-quality products to aid growth.
• Dealer inventory is normal, although near-term weather risk in Europe and uncertain monsoons in India remain concerns.

Management estimates market shares of about 18-19 per cent in India, 3-4 per cent in the United States and 7-8 per cent in Europe. It aims to increase global market share to 8 per cent from 6 per cent over five years.

Volume Growth and Earnings Estimates

Anand Rathi now forecasts off-highway tyre volume to grow at a 12 per cent CAGR over FY26-28E, including 17 per cent growth in FY27E. Expected volume growth over FY26-28E is highest in India, followed by the Americas, Europe and Rest of World.

Following higher volume and realisation assumptions, the broker raised its FY27E and FY28E estimates as follows:

• Revenue estimates were raised by 11.5 per cent for both FY27E and FY28E.
• EBITDA estimates were raised by 9.1 per cent for FY27E and 7.5 per cent for FY28E.
• EPS estimates were raised by 13.1 per cent for FY27E and 8.9 per cent for FY28E.

Margin Recovery and Cost Outlook

Margin recovery is expected to be gradual, supported by cumulative price hikes of 8-10 per cent over the past two quarters, currency hedges and some cooling in input prices. However, management expects the raw-material basket to rise by about 5 per cent in Q2 FY27, resulting in a net margin impact of 200 basis points.

Anand Rathi forecasts an EBITDA margin of 23.2 per cent in FY28E versus 22.8 per cent in FY26. The recovery is expected to remain constrained by commodity inflation and lower-margin new verticals.

New Verticals and Capital Expenditure

Balkrishna Industries began supplying truck and bus radial and selected two-wheeler products from April 2026. Anand Rathi estimates TBR/PCR revenue of Rs3bn in FY27E and Rs6bn in FY28E. However, it assumes these products will account for 15 per cent of revenue by FY30E, below the company’s 20 per cent objective, because market penetration is competitive. The broker forecasts mid-single-digit margins for these new verticals.

The company spent Rs10bn on capex in Q1 FY27 and expects to spend another Rs15-20bn during the balance of FY27E. Of its Rs68bn capex plan through FY29, Rs38bn has been spent.

Valuation and Key Risks

The Rs2,950 target price values FY28E EPS at 28 times, compared with 25 times previously. Anand Rathi applies a 30-times multiple to the 90 per cent off-highway tyre business and 10 times to the 10 per cent new-verticals business. The off-highway tyre multiple was raised from 27 times, reflecting stronger volume trends.

Key risks identified by the broker include:

• Slower growth in underlying segments.
• Weak execution in new verticals.
• Unfavourable European or United States regulations.
• Higher commodity prices.
• Adverse foreign-exchange movement.