By Sujata Muguda, Shreyas WebMedia Solutions
Feb 15: JK Tyre and Industries Ltd is one of the leading tyre manufacturers in India, with a market share of around 12%. The company has a diversified product portfolio, catering to various segments such as passenger cars, commercial vehicles, two-wheelers, three-wheelers, and off-the-road vehicles. The company has 12 manufacturing plants in India and Mexico, with a total capacity of 35 million tyres per annum. The company also has a strong distribution network of over 4,000 dealers and 550 exclusive outlets across the country.
The company reported a strong performance in the third quarter of FY 2024, with a revenue growth of 25% year-on-year and a net profit growth of 40% year-on-year. The company benefited from the recovery in the domestic automobile industry, which witnessed a robust demand for passenger cars and two-wheelers. The company also gained from the favourable raw material prices, which helped improve its operating margin by 300 basis points to 14%. The company also reduced its debt by 15% in the quarter, which improved its financial position and liquidity.
The company has been investing in new product development, capacity expansion, and brand building to enhance its competitive edge and market share. The company recently launched a new range of radial tyres for trucks and buses, which offer better fuel efficiency, durability, and safety. The company also plans to increase its capacity by 10% in the next two years, with a focus on the high-margin radial segment. The company has also been strengthening its brand image through various marketing initiatives, such as sponsoring sports events, launching digital campaigns, and partnering with celebrities.
The company faces some challenges in the form of rising competition from domestic and global players, regulatory uncertainties, and environmental concerns. The company also has to comply with the changing emission norms and safety standards, which may increase its compliance costs and affect its profitability. The company also has to address the environmental issues related to tyre disposal and recycling, which may impact its reputation and social responsibility.
In conclusion, JK Tyre and Industries Ltd is a well-established and profitable tyre manufacturer in India, with a diversified product portfolio and a strong distribution network. The company has delivered a solid performance in the third quarter of FY 2024, driven by the recovery in the domestic automobile industry and favourable raw material prices. The company has also been investing in new product development, capacity expansion, and brand building to enhance its competitive edge and market share. Therefore, we recommend a HOLD rating for the stock, with a target price of Rs. 150 per share.