Balkrishna Industries downgraded to 'Hold' by MarketsMOJO due to mixed financial performance

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.
In terms of financial performance, Balkrishna Industries has shown positive results in the quarter ending June 2024. Its operating cash flow was the highest at Rs 2,082.64 crore and its net sales were also at a record high of Rs 2,714.50 crore. The company's operating profit to interest ratio was also the highest at 30.27 times.

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

With a market cap of Rs 58,962 crore, Balkrishna Industries is the second largest company in the sector, behind MRF, and constitutes 31.81% of the entire sector. Its annual sales of Rs 9,924.02 crore account for 10.54% of the industry.

However, the company has shown poor long-term growth with an annual growth rate of only 2.00% in operating profit 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. However, 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 19.16%, its profits have risen by 50.6%. The PEG ratio of the company is 0.7, indicating that it may be undervalued. However, in the last 1 year, the stock has underperformed the market (BSE 500) with a return of only 19.16% compared to the market's return of 39.48%.

Overall, MarketsMOJO's downgrade to 'Hold' for Balkrishna Industries is based on a combination of factors and investors should carefully consider these before making any investment decisions.