JK Tyre has target of Rs 200: Rajen Shah

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JK Tyre has target of Rs 200: Rajen Shah

JK Tyre has target of Rs 200, says Rajen Shah, CIO of Angel Broking.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Rajen Shah See what other Experts & Brokerages are saying about JK Industries See messages about JK Industries

JK Tyre has target of Rs 200, says Rajen Shah, CIO of Angel Broking.

Shah told CNBC-TV18, "JK Tyre has come down to very compelling levels. It is quoting at about Rs 75 and the market cap of this company is about Rs 300 crore. I do expect the slowdown to be there for a while in the auto industry. If you see for the foreseeable future we at Angel Broking do expect the auto industry to grow at least about 12% for the next 2-3 years. More than that the replacement demand also has started happening and that should be good for the tyre industry."

He further added, "I will make a small comparison in case of the tyre industry. MRF this year would report about Rs 10,000 crore of turnovers and the market cap is about Rs 3,000 crore. Apollo would report about Rs 11,000 crore of turnover and the market cap is about Rs 3,000 crore. So market cap of these two companies is about 30% of the turnover. If you see JK Tyre it is too cheap. The turnover this year would be about Rs 7,000 crore. The consolidate revenue, I am talking about and the market cap is just about Rs 300 crore. Logically if you were to give it the same market cap as MRF or Apollo it should have been at Rs 2,000 crore. JK is quoting at about Rs 300 crore market cap. I think it is too cheap. Even if you discount the quality of management and the brand, I think JK needs to trade at least Rs 1000 crore market cap, so it is a clear cut 200% upside in the stock."

"The other reason why I feel that tyre industry should do well is that rubber prices will collapse from here. I do expect rubber prices to come down from Rs 215 per kg which goes into tyre manufacturing to about Rs 175-180 levels. JK

spends almost two and a half thousand rupees on rubber every year - 15% collapse in rubber prices will straight away lead to about Rs 375 crore of saving on the rubber cost."

'Sometime during the next three years I do expect the earnings of this company to climb as high as Rs 35-40 per share and that is when the share can easily go upto Rs 200 levels. I think in the next 2-3 years, I think it should touch Rs 200 levels that would be my target."