Over FY2015–FY2025, Balkrishna Industries Limited (BIL) has delivered a volume CAGR of approximately 7%. Historical guidance and commentary have consistently indicated that the company’s long-term volume growth is expected to remain around this level.
BIL’s earlier foray into carbon black and recent entry into the Truck and Bus Radial (TBR) and Passenger Car Radial (PCR) segments signal a strategic effort to lift long-term growth above historical levels. While these initiatives are expected to be return-dilutive compared to the legacy Off-Highway Tire (OHT) business, management appears to be prioritizing scale and market expansion due to limited growth avenues within core operations. With volume growth of just 3% CAGR expected over FY2022–FY2025, a normalization of demand is anticipated from FY2027 onwards—reminiscent of the recovery observed during FY2012–FY2017.
Despite the expected moderation in Return on Capital Employed (ROCE), BIL is still projected to outperform peers in terms of profitability and maintain robust free cash flows. Following the recent correction, the stock is trading at approximately 24.6x one-year forward earnings, compared to MRF’s 27x. This discount appears unwarranted. Reflecting the shift toward lower-ROCE verticals, the target P/E multiple is revised downward from 30x to 27x. The recommendation remains Long, with a revised price target of ₹2,941 by June 2026 (previously ₹3,402).
BIL has outlined an aspirational target of ₹230 billion in revenue by FY2030. The projected revenue mix includes 70% from the core OHT business, 10% from carbon black, and 20% from the new domestic PCR/TBR verticals. This growth will be supported by a planned capital expenditure of ₹35 billion, with a continued emphasis on premium, niche market segments. The company aims to sustain EBITDA margins in the range of 23–25%.
The expansion into PCR/TBR is led by Mr. Satish Sharma, former President of Apollo Tyres, whose experience of over three decades, along with strategic hires from key competitors, underlines the seriousness of BIL’s commitment to this segment.
Historically, BIL has consistently outperformed domestic peers such as MRF, CEAT, and Apollo Tyres in both ROCE and margin metrics, largely due to its focus on high-margin niche OHT products and integrated operations. Even with the expected dilution from the TBR and PCR businesses, BIL is likely to maintain an edge in return metrics, supported by scale benefits and overall growth.
Further, the European market—BIL’s key export destination—is beginning to show signs of recovery following a prolonged period of weakness and inventory correction. A potential rebound in the OHT segment could offset margin pressures from the domestic TBR/PCR categories, helping to preserve financial stability.
BIL remains optimistic about the growth potential of its carbon black business, with capacity expansion from 200,000 MTPA to 360,000 MTPA expected by early 2026. Over the past five years, the Indian carbon black sector has seen margin improvement driven by diversification, export growth, capacity additions, and sustainability efforts. These developments have facilitated better cost management and increased sales of higher-value specialty products. As BIL’s advanced carbon black facilities reach optimal utilization, similar benefits are anticipated to accrue, supporting overall operational efficiency.
