JK Tyre & Industries Ltd. share price target

JKT said (1) it expects the demand situation to normalise from Q2FY22E onwards; (2) it added >1,400 dealers in FY21; (3) raw material prices are set to steepen by 10-12% QoQ in Q1FY22E. The company is looking to mitigate the same via calibrated price hikes, premiumisation of products, operating leverage gains and capacity debottlenecking; (4) debottlenecking exercise is set to expand capacity by ~10% over the next 2-2.5 years at a cost of ~| 150-200 crore; (5) net debt as of FY21 was at ~| 4,500 crore and JKT is looking to retire ~| 1,500 crore in the next three years; (6) Tornel revenue...

actual policy draft is expected to be made public over the next few weeks. The ministry press release states that commercial vehicles beyond 15 years old and that fail to obtain a fitness certificate from automated fitness centres (adhering to global standards), will be de-registered and declared as end of life vehicles. In case of private vehicles, those over 20 years old, and which fail the testing or re-registration will be declared as end of life vehicles. Voluntary scrappage policy or Voluntary Vehicle-Fleet Modernization Programme (VVMP) is aimed at curbing pollution, replacing the existing fleet...

EBITDA grew to Rs. 500cr (+104.9% YoY), as margin expanded 700bps YoY to 18.1% with the increase in volumes and reduction in other operating costs as a % of sales. Resultantly, reported net profit rose to...

Demand picture looking strong, margin commentary positive The channel mix changed to ~45% replacement, ~40% OEMs and ~15% exports and STUs as domestic OEM channel posted substantial volume increase YoY in the quarter. The Indian CV industry is on the cusp of a cyclical recovery in our opinion, with vast majority of usual about two year down cycle now behind us and key players posting encouraging volume numbers recently. The same is set to benefit JKTIL courtesy its large presence in the CV market as well as high dependence on the segment...

JK Tyre (JKI) surprised positively on both revenue and earnings in Q3FY21, led by strong replacement demand as well as above-expected gross margins which could stem from low-cost inventory.

Low interest rates, focus on exports, and benefits from replacement market should boost the performance in the medium-term. However, we remain cautious on the stock given near-term uncertainties. We downgrade our rating on the stock to HOLD with a revised target price of Rs. 79 based on 14.5x FY22E adj. EPS. Replacement market opportunities boost revenue Revenue from operations rose 5.6% YoY to Rs. 2,275cr in Q2FY21 with the resumption of economic activities along with benefit from the replacement market contributed...

With recent import curbs issued by the government and low input costs, we expect JK Tyres to benefit in the near-term. Hence, we upgrade our rating to Accumulate with a TP of Rs.73 based on 10x FY22E adj. EPS. Quarter sees decline in revenue Revenue from operations declined 33.7% YoY to Rs. 1,795cr in Q4FY20. The weak demand in the domestic market was further impacted by the COVID situation and led to a slump in domestic sales by 32.4% YoY to Rs. 1,635cr. Global auto markets also witnessed slowdown with revenue from Mexico down 36.2% YoY to Rs. 200cr in Q4....

The Director General of Foreign Trade (DGFT) vide its June 12 circular has notified that tyre imports into India will now fall into the restricted category vs. free category assigned earlier, implying imports would now require DGFT permission/licence vs. no such restrictions earlier. The notification does not put any additional duties on tyre imports. It covers tyre imports across vehicle categories, viz. passenger vehicles (PV), commercial vehicles (CV), 2-W (motorcycle & scooters) & bicycles and across both tyre types i.e....

Given the challenging business conditions amidst corona outbreak, we believe upside potential would be limited in the medium-term. Hence, we maintain our HOLD rating on the stock with a revised target price of Rs. 52 based on 4.2x FY22E adj. EPS. Corona update and impact on industry COVID-19 pandemic continues to weigh on global economic growth including India. IMF recently slashed its GDP growth forecast for India to 1.9% from 5.8% for FY21. Plants shut down and limited dealership activities owing to lockdown added pressure...

JK Tyre is a leveraged company with absolute debt at ~| 5,400 crore as of FY20E with resultant debt: equity at 2.2x. Going forward, with limited capex plans and operating leverage benefits under way, we expect JKTIL to retire debt with resultant debt: equity expected at 1.4x as of FY22E. However, we await improved financials amid prolonged slowdown in the domestic CV space. We maintain our HOLD rating on the stock with a target price of | 85...