Buy JK Tyre; target of Rs 238: Angel Broking

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Buy JK Tyre; target of Rs 238: Angel Broking

Angel Broking is bullish on JK Tyre and has recommended buy rating on the stock with a target of Rs 238, in its August 16, 2010 research report.

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Angel Broking is bullish on JK Tyre & Industries and has recommended buy rating on the stock with a target of Rs 238, in its August 16, 2010 research report.

"JK Tyre reported a turnover of Rs 1168 crore (Rs 901 crore) for 1QFY2011, an increase of 29.7% yoy. Top-line growth was aided by volume growth of ~15.7% in tonnage terms and ~13% growth in net sales realisation. The company posted a 31.4% yoy decline in operating profit to Rs 73 crore (Rs 107 crore)  for 1QFY2011. Operating margin dipped on a yoy and qoq basis primarily due to a spurt in rubber prices leading to a substantial 780 bp yoy increase in raw-material cost at 72.7% (64.9%) of sales in 1QFY2011. JK Tyre reported net profit of Rs 19.5 crore (Rs 40.8 crore) for the quarter, which was better than our expectation of Rs 16 crore. We broadly maintain our earnings estimates for FY2011-12E. We estimate the company to post EPS of Rs 39.6 in FY2011E and Rs 47.6 in FY2012E. At current levels, the stock is available at attractive valuations of 4.1x and 3.4x FY2011E and FY2012E EPS, respectively. We maintain a Buy on the stock with a Target Price of Rs 238, at which level the stock would trade at 5x, 3.3x and 0.8x FY2012E EPS, EV/EBITDA and P/BV, respectively," says Angel Broking research report.

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To read the full report click on the attachment