Buy JK Tyre; target of Rs 205: Emkay

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Buy JK Tyre; target of Rs 205: Emkay

Emkay Global Financial Services is bullish on JK Tyre and Industries and has recommended buy rating on the stock with a target of Rs 205, in its August 18, 2010 research report.

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Emkay Global Financial Services is bullish on JK Tyre and Industries and has recommended buy rating on the stock with a target of Rs 205, in its August 18, 2010 research report.

"JK Tyre and Industries reported standalone EBIDTA of Rs 731 million, 11% below expectation. This was primarily due to higher raw material cost pressure. RM to sales stood at 72.7% versus our expectation of 70.7%. Average rubber cost for the quarter stood at Rs 160 per kg. Infact raw material pressure overshadowed other storng control of other costs. We are slightly disappointed with the Tornel's EBIDTA margins of 3.9% as we were looking for EBIDTA margins of 5% for the quarter. JK Tyre reported standalone net sales of Rs 11.7 billion (Yoy growth of 29.7%) against our expectation of Rs 11 billion. Currently, we do not have details regarding tonnage sold during the quarter. Also, management did not share financials of Tornel, except that Tornel has reported EBIDTA margins of 3.9%. We have lowered our consolidated FY11E and FY12E EPS by 19% and 10% to Rs 33.3 and Rs 40.7 per share respectively. We have lowered our target price to Rs 205 (earlier Rs 225). We maintain our BUY rating on the stock," says Emkay Global Financial Services research report.
    
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