JK Tyre & Industries Ltd. share price target

In Q4FY15, on Consolidated level,Revenue decreased by 5.4% on YoY basis. Revenue from India decreased by 5% to Rs 15035 Mn and from Mexico decreased by 2.8% to Rs 3152 Mn. EBITDA margins for the quarter improved by 384 bps on YoY basis to 14.2% on the back of significant savings in the raw materials because of fall in natural rubber prices in the Domestic and International Rubber markets.

JK Tyre is expected to kick start its next growth cycle from FY16E onwards as its capex on incremental capacities will start generating returns. We expect higher revenues along with the increase in margins to deliver healthy return ratios and strong balance sheet. We initiate coverage on JK Tyre & Industries Ltd with a BUY rating valuing at 4.2x FY17E EV/EBITDA/5.8x FY17E P/E for a target price of Rs 145.