JK TYRE – Durable and Dependable

JK Tyre & Industries Ltd is one of the top automotive tyre manufacturers in India. The company is engaged in manufacturing of automobile tyres, tubes and flaps. The company manufactures Radial and Bias 4-wheeler tyres for buses passenger cars, trucks, LCVs, tractors etc. JK Tyre & Industries sell their products under the brand name `JK Tyre’. They have four plants located in Madhya Pradesh, Rajasthan, and Karnataka.

JK Tyre & Industries Ltd is one of top 500 Shares, identified by Dynamic Research based on technical and fundamental research.

JK Tyre share price has touched a 52 week high of Rs. 148.30 on 02 -Sep -2016 and a 52 week low of Rs.73.80 on 29 -Feb -2016, and is currently trading at Rs. 145.90.

Share Holding

The promoters holding in JK Tyre & Industries stood at 52.34%, while Institutions and Non-Institutions held 10.51% and 37.15% respectively.

Some of the Non-Promoters holding securities more than 1% of total number of shares are

• Edgefield securities limited:7.69%
• Ultima finvest limited:1.27%
• Foreign Individuals or NRI:1.27%

Financial AnalysisQuarterly Results

For the quarter ended June 2016, the total income from operations of JK Tyre has reported a marginal growth of 0.20 % on Y-o-Y basis to Rs. 1780.75 cr as against Rs. 1777.18 cr during the same quarter last year. The enhancement in total income from operations suggests strong development in business.

The operating profit JK Tyre on Consolidated has shown a growth of 11.29% Y-o-Y to Rs. 282.43 cr as against Rs. 253.78 cr during the same quarter last year.

The net profit of JK Tyre has declined by 15.12% Y-o-Y to Rs.100.26 cr as against Rs 118.12 during the same quarter previous year. The decline in net profit is on back loss of Rs. (-40 cr) on exceptional item.

The earnings per share of the company have declined by 15.16% Y-o-Y to Rs. 4.42 as against 5.21 during the same quarter last year.

Annual Results

For the year ended March 31, 2016 JK Tyre on Consolidated basis reported net sales of Rs. 6953.12 cr compared to Rs. 7383.17 cr FY2015.

For the year ended March 31, 2016 JK Tyre on Consolidated basis reported net profit of Rs. 463.28 cr compared to profit of Rs. 329.66 cr FY2015, registering a growth of 40.53% annually.

Ratio Analysis

The above ratio suggests that the company is operating with a debt-equity ratio of 1.53. JK tyre can easily meet up with the interest expenses pertaining to its debt obligations. The company is generating good returns with the money the share holders have invested; the above ratio also suggests that the management is efficiently using its assets to generate earnings.

Investment Rationale

• Given the positive sentiments about Indian economy across the Globe and favorable GDP numbers reflects signs of further possible growth in Automobile industry.
• Maintain leadership position in truck/bus radials segment: JK Tyre possesses one of India’s largest tyre capacities (1.87 million truck/bus radials per annum).
• JK tyre will continue to capitalize on this growing segment to maintain leadership, enhance margins, deepen market presence and ensure that products reach new customers.
• JK tyre is the first tyre company in the world to be certified for QS 9000 for multi location operations across the entire product range.
• It is a research-led company, creating tyres in line with the best global quality standards.
• It is a value-accretive company that has enhanced market capitalization seven-fold in just three years.
• JK Tyre is a preferred supplier to prominent automotive Original Equipment Manufacturers like Tata Motors, Maruti Suzuki, Honda, Ashok Leyland, Mahindra & Mahindra, Volvo Eicher, General Motors, Volkswagen, Fiat, Nissan, BEML, TAFE and Caterpillar India, among others.
• JK Tyre’s acquisition of Tornel opened gates to several new international markets.
• The Indian tyre industry’s outlook is positive as growth in domestic tyre volume is expected to increase by around 8-10% during 2016-17 on the back of a pickup in auto demand, improving economy and stable raw material prices.

Investment Opinion

At CMP of Rs.146 the stock traded at a P/E of 6.80 on 2nd September, the market cap of the company is 3034.76 crore. As per Dynamic Levels we recommend a buy on JK tyre at CMP with a price target of Rs.175 and stop 130.

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