JK Tyre & Industries Ltd. share price target

JKI’s Q3FY25 performance was significantly impacted by high-cost inventory (major hit in Q3; guided to partial reversal in Q4) along with subdued demand from CV OEMs; this resulted in a largely flattish consolidated revenue performance.

JK Tyre (JKI) Q2 results were soft, impacted by ~16% sales decline in Mexico on weak Latin American demand and 10% currency depreciation vs INR.

With new product launches, better quality and brand equity improvement, the company has witnessed better pricing and margins over the past three years. Its consolidated EBITDA margins improved from pre-Covid 10.7% in FY19 to current 12.3% in Q1FY24.

We visited the Chennai plant of JK Tyre & Industries (JKI) and met the management for an insight on the company’s business strategy/outlook. Key takeaways: 1) The Chennai plant with a current capacity of 330tpd can produce 4.85mn/1.2mn PCR/TBR per annum respectively with cumulative capex of ~Rs25bn having been being done on this facility.

We expect strong demand from the domestic as well as international market, however input cost inflation remain key risk to the business. Hence, we remain cautious on the stock and maintain our HOLD rating with a rolled forward target price of Rs. 139 based on 6x FY24E adj. EPS. Revenue crossed Rs. 3000cr mark for the first time The company recorded its highest ever revenue of Rs. 3,076cr with year-on-year growth of 11.1% (+3.0% QoQ) on the back of all the market segments performing well. The company also recorded highest ever export of Rs. 484cr during the quarter, taking...

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Year started in subdued note with the resurgence of the second wave of the pandemic, which resultantly impacted the demand. Also, tyre industry is witnessing a steep input cost pressure, which impacts the margin. Hence, we remain cautious on the stock and maintain our HOLD rating with a revised target price of Rs. 172 based on 9x FY23E adj. EPS. Sales grows YoY on overseas expansion Q1FY22 sales grew 130.7% YoY to Rs. 2,608cr (-10.9% QoQ), primarily driven by momentum with export sales of Rs. 476cr (vs. Rs. 137cr in Q1FY21). The company...