Balkrishna Industries downgraded to 'Hold' by MarketsMOJO due to high valuation and slow growth
Balkrishna Industries, a leading tyre company in the largecap industry, has recently been downgraded to a 'Hold' by MarketsMOJO on August 5, 2024. 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.In addition, the company has shown positive results in the March 2024 quarter, with its PBDIT(Q) reaching a record high of Rs 681.12 crore and its OPERATING PROFIT TO NET SALES(Q) at 25.40%. Its NET SALES(Q) also reached a record high of Rs 2,681.92 crore.
Technically, the stock is currently in a Mildly Bullish range, with its MACD and KST technical factors also showing a Bullish trend. Furthermore, the company has a high institutional holding of 35.05%, indicating that these investors have better capability and resources to analyze the fundamentals of companies compared to most retail investors. In fact, their stake in Balkrishna Industries has increased by 0.73% over the previous quarter.
With a market cap of Rs 63,795 crore, Balkrishna Industries is the largest company in the sector, constituting 34.41% of the entire sector. Its annual sales of Rs 9,368.87 crore also make up 10.12% of the industry.
However, the company has shown poor long-term growth, with its operating profit only growing at an annual rate of 2.00% over the last 5 years. Additionally, with a ROCE of 15.2, the stock is currently trading at a Very Expensive valuation with a 6 Enterprise value to Capital Employed. However, it is worth noting that the stock is currently trading at a discount compared to its average historical valuations.
Despite generating a return of 27.17% over the past year, the company's profits have only risen by 39.2%, resulting in a PEG ratio of 1.1. Overall, while Balkrishna Industries remains a strong player in the tyre industry, investors may want to hold off on buying the stock until its long-term growth improves.
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