Balkrishna Industries downgraded to 'Hold' by MarketsMOJO, despite strong financials and bullish trend

Balkrishna Industries, a leading player in the tyre and allied industry, has recently been downgraded to a 'Hold' by MarketsMOJO. This decision was based on various factors, including the company's high management efficiency with a ROCE of 17.29% and its strong ability to service debt with a low Debt to EBITDA ratio of 0.63 times.
The company has also shown positive results in the Jun 24 quarter, with its operating cash flow at a record high of Rs 2,082.64 crore and net sales at Rs 2,714.50 crore. Its operating profit to interest ratio was also the highest at 30.27 times.

Technically, the stock is currently in a Mildly Bullish range, with multiple factors such as MACD, Bollinger Band, and KST indicating a bullish trend. Additionally, the company has a high institutional holding of 35.05%, which shows that these investors have better capability and resources to analyze the fundamentals of the company.

With a market cap of Rs 60,122 crore, Balkrishna Industries is the largest company in the sector, constituting 32.98% of the entire sector. Its annual sales of Rs 9,924.02 crore make up 10.55% of the industry.

However, the company has shown poor long-term growth, with its operating profit growing at an annual rate of only 2.00% over the last 5 years. Its ROCE of 15.2 also indicates a very expensive valuation with a 5.8 Enterprise value to Capital Employed.

Despite its recent positive performance, the stock is currently trading at a discount compared to its average historical valuations. In the past year, while the stock has generated a return of 20.68%, its profits have risen by 50.6%, resulting in a PEG ratio of 0.7.

In the last 1 year, Balkrishna Industries has underperformed the market, with a return of 20.68% compared to the market (BSE 500) returns of 34.97%. This could be a factor in the downgrade of the stock to a 'Hold' by MarketsMOJO.