Shares of JK Tyre jumped more than 11 percent in early trade on November 2 after the company grew its Q2 consolidated net profit by an impressive four times. At 9.20 am, JK Tyre stock was trading at Rs 341 on NSE. JK Tyre and Industries reported a massive 372 percent on-year growth in consolidated profit at Rs 242.1 crore for the July-September period of FY24, driven by strong operating performance and lower input costs.
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Input cost dropped 9.1 percent YoY to Rs 2,199.4 crore and purchase of stock-in-trade declined 75 percent YoY to Rs 43 crore in Q2FY24. Consolidated revenue from operations increased by 3.75 percent to Rs 3,897.5 crore compared to year-ago period.
Anuj Kathuria of JK Tyre, speaking on CNBC-TV18, mentioned that they expect strong demand in both the OEMs (Original Equipment Manufacturers) and the replacement market. The second half of the year (H2) is expected to be robust in the domestic market. In the previous year, the first half (H1) saw good demand in export markets, and they anticipate better export demand in H2FY24.
He further stated that, "we remain cautious due to global uncertainties." JK Tyre benefited from cost reduction efforts and lower raw material prices, especially in premium products like passenger car tires and truck/bus radials, which improved their profit margins. They plan to closely monitor their raw material costs in the future.
Brokerage Views
Brokerage firm Emkay Global had assigned a ‘buy’ rating to the stock with a 12-month target price of Rs 415 in a report dated October 10, 2023. The report further stated that, “We initiate coverage on JK Tyre (JKI) with a ‘buy’ and 55 percent upside, at 10x FY25E; we believe JKI’s stock price can potentially double over 3 years.”
“Amid Tyre industry’s structural improvements (curtailed imports, enhanced export competitiveness, premiumization, calibrated capex), JKI has been outperforming peers over past 12 quarters (vs. over 20 percent underperformance in FY13-20) via structural transformation in competitive position (higher-than peer spends on R&D, marketing and distribution expansion), operating efficiencies and financial discipline (calibrated capex).”
Stock Performance
JK Tyre stock has given a return of 70.85 percent over the last six months, as of November 1 close. The benchmark Nifty50 index has given a return of 4.64 percent over the same duration.
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