Buy JK Tyre; target of Rs 650: Emkay Global Financial

Emkay Global Financial's research report on JK Tyre

JK Tyre (JKI) Q2 results were soft, impacted by ~16% sales decline in Mexico on weak Latin American demand and 10% currency depreciation vs INR. While domestic MHCVs have been weak in H1 (JK is among the segment leaders with 53% CV contribution in consolidated sales), outlook is improving amid expected pickup in infra/capex activity and a favorable base. Further, softening rubber prices (down over 20% from recent peak), pricing action (~3-3.5% YTD), and better mix should aid margin recovery Q4FY25E onwards. Q2 likely represents a bottom quarter with improving outlook for demand and profitability.

Outlook

We cut FY25E/26E/27E PAT by ~18%/10%/8% (factoring in Q2 miss, gradual margin recovery), and retain BUY (revised TP of Rs 650 at 15x Sep-26E PER) amid attractive valuations (~8.5x Sep-26E PER vs 17.3 peer average).