Balkrishna Industries shares tumble over 10% after weak Q4 results, Nomura downgrade; should you still buy?

Shares of Balkrishna Industries plunged more than 10 percent in intraday trade on Monday, May 26, after the tyre manufacturer posted weak financial results for the March quarter of FY25 and faced a downgrade from Nomura. The Japanese brokerage house revised its rating from "buy" to "neutral" and sharply cut its target price, citing increased risks stemming from the company’s foray into more competitive market segments.

Weak Q4 Earnings Drag Sentiment

Balkrishna Industries Ltd reported a 25 percent year-on-year drop in standalone net profit for the quarter ended March 2025, with profits falling to ₹362 crore. This decline came despite a modest 5 percent increase in revenue, which stood at ₹2,838 crore, as per the company’s investor presentation. The drop in earnings was attributed to rising input, finance, and employee costs, which offset the revenue growth.

EBITDA for the quarter rose just 1 percent YoY to ₹703 crore, but margins contracted 115 basis points to 24.78 percent due to elevated raw material costs. For the full financial year 2024-25, the company reported an over 13 percent increase in net profit to ₹1,628 crore, up from ₹1,438 crore in FY24. Annual revenue rose nearly 13 percent to ₹10,615 crore. FY25 EBITDA rose 16 percent to ₹2,682 crore, with a margin of 25.26 percent—up 50 basis points over the previous year.

The board announced a final dividend of ₹4 per share for FY25.

Capex Plans and Strategic Expansion

Looking ahead, Balkrishna Industries plans to expand its total tyre manufacturing capacity to 4.25 lakh tonnes per annum, following the completion of its ongoing capital expenditure and de-bottlenecking efforts. A new off-road tyre project at Bhuj with a production capacity of 35,000 tonnes per year is expected to become operational by the end of FY26.

The company’s board has approved a capital expenditure of ₹3,500 crore over the next three years. This investment will fund additional production facilities at Bhuj, including units for carbon black, power generation, commercial vehicle tyres, rubber tracks, and passenger car radial tyres.

Balkrishna Industries Stock Performance

The market reaction to the Q4 results and guidance was swift and negative. Shares of Balkrishna Industries fell as much as 10.3 percent to a low of ₹2,385 on the BSE, pulling the stock more than 29 percent below its 52-week high of ₹3,377.95, touched in June 2024. In contrast, the stock had hit a 52-week low of ₹2,157.20 as recently as April 2025.

Over the past year, the stock has declined nearly 13 percent. In the month of May alone, it has lost over 10 percent, reversing the nearly 5 percent gain seen in April. This follows a consistent downtrend earlier in the year: the stock slipped 2.3 percent in March, 5.6 percent in February, and 4.7 percent in January.

Nomura Downgrades to ‘neutral’

Nomura’s downgrade to “neutral” from “buy” came alongside a downward revision in its target price from ₹3,242 to ₹2,644—a level close to last Friday’s closing price. The brokerage flagged concerns around Balkrishna’s strategy to diversify beyond its traditional off-highway tyre (OHT) focus into the highly competitive truck and passenger car radial (TBR/PCR) segments.

According to Nomura, these new segments are already dominated by entrenched domestic players, presenting significant entry barriers. The firm warned that Balkrishna may need to make considerable upfront investments to build distribution networks and enhance brand recall in these segments, which could strain profitability.

Nomura’s analysis suggests that this expansion could reduce the company’s blended EBITDA margins to 22–23 percent, from the earlier average of 26 percent. It also projected a possible 200 basis point decline in Return on Equity (RoE), depending on how the product mix evolves.

Despite these concerns, Nomura kept its FY26 and FY27 earnings estimates broadly unchanged but revised its valuation outlook downward. It now expects the company to trade at a lower multiple range of 12x–16x earnings, compared to the earlier 14x–18x, reflecting the anticipated return dilution from entry into lower-margin markets.

Nomura highlighted several risks to the company’s future performance, including a slower-than-expected recovery in the off-highway tyre market, any sharp increase in commodity prices that could pressure margins, and the inability to pass on costs in a more competitive environment. Within the tyre sector, the brokerage currently prefers Ceat over Balkrishna Industries, citing a more favorable competitive positioning and risk-reward profile.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.