Over 3,00,000% return! This stock made small investors rich in 20 years

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A tyre stock, which has been on a roll for the past 20 years, has received mixed views from brokerages despite the company reporting robust March quarter (Q4FY21) results. Shares of the company have rallied 3,467 times, or 3,46,603%, to an all-time high of Rs 2,138 on May 17, 2021, from an adjusted share price of Rs 0.62 in May 2001.

The rise in share price shows that an investment of Rs 10,000 in the tyre major would have now fetched Rs 3.47 crore.

The company hogged the limelight on Dalal Street on April 17 after it reported around 45% year-on-year (YoY) growth in net profit at Rs 372.20 crore for the quarter ended March 31. On the other hand, it posted sales of Rs 1754.89 crore, registering a growth of nearly 29% YoY.

Overall, the bottom line of the company has grown 36% annually during the past 20 years, while top line increased by over 19% annually since FY2001. Going ahead, Anand Rathi Shares and Stock Brokers believes that revenue is likely to grow 20% and earnings at 25% CAGR over FY21-23 for Balkrishna Industries.

Retail outlook

Management also stated that retail sales are strong across regions led by strong demand for agriculture and OTR tyres and will focus on existing geographies of Europe, USA and India, and other potential markets like Russia and Australia to drive growth over the next 2-3 years.

Here’s what analysts think about Balkrishna Industries post-Q4 results:

Anand Rathi Shares and Stock Brokers The brokerage continues to remain positive on Balkrisna Industries on the back of expected strong volume growth in coming years and its ability to sustain margins ahead. It has a ‘Buy’ rating on Balkrishna Industries with a target price of Rs 2,232.

Dolat Capital The brokerage has a ‘Sell’ call on Balkrishna Industries (BKT) with a price target of Rs 1,648. Dolat Capital raises FY22 and FY23E earnings by around 6% factoring in high volume guidance for FY22.

“We expect EPS to grow at 11% CAGR over FY21-23E driven by 12% volume growth. However, the premium valuation (28/25x for FY22/23E EPS) captures the strong cash flow-generating capability and possible medium market share gains for BKT in the global OHT market and domestic agri market,” Dolat Capital said.

BOB Capital Markets The brokerage also retained ‘Sell’ on BKT due to higher valuations. “We scale up FY22 and FY23 EPS estimates by 22% and 16% to incorporate higher volume growth and margin assumptions. Over FY21-FY23, we pencil in a revenue, EBITDA and PAT CAGR of 12%, 7% and 8% for Balkrishna Industries. Ascribing an unchanged 22x FY23E P/E multiple to the stock – in line with its 5Y average – we arrive at a new March 22 target price of Rs 1,550 (vs. Rs 1,340),” it said.