Download Unicorn Signals App

Powered By EquityPandit

Balakrishna Industries Shares Fall 9% as Inventory Challenges Weigh on Q4 Results

Balakrishna Industries shares fell 9% after Q4 profit fell 31% year-on-year.

Shares of Balakrishna Industries fell 9% on May 29 after the company reported year-on-year declines in net profit, revenue and operating profit for the March quarter.

In its investor presentation, the company said that while the fourth quarter was the best in history, the channel inventory situation remained challenging. However, the company expects these issues may be resolved by June or July.

In the fourth quarter, Balakrishna Industries delivered an EBITDA margin of 21.3%, showing sequential improvement due to better absorption of high-cost raw material inventory and lower freight charges. The company said in its investor presentation that while they are continuously investing in brand building and marketing initiatives to increase market share, it may take time for the benefits of these efforts to be fully reflected in sales percentages.

From a sequential perspective, Q4FY23 was a better quarter for Balakrishna Industries. The company experienced higher volumes, improved end-market demand and partial clearance of high-priced raw materials.

Looking ahead, Balakrishna Industries remains positive on its outlook for FY24. It expects to improve margins through various factors such as favourable raw material costs, better hedging ratios and full normalisation of logistics costs.

Regarding end markets, the company expects Europe to normalise later this year, while the US and Indian markets are expected to continue their performance trajectories from FY23.

Nomura has a “neutral” rating on Balkrishna Industries in its review and sets a target price of Rs 2,015 per share. Nomura said the company’s financial results showed a decline in revenue, volumes and average realization, but an increase in tonnage.

Get Daily Prediction & Stocks Tips On Your Mobile