JK Tyres stock rises on robust earnings performance of subsidiary

It's subsidiary Cavendish Industries Ltd (CIL) witnessed a profit of ₹46.87 crore in the quarter ended December 2020. This compares with a loss of ₹4.51 crore in Q3 FY20. The improvement in earnings performance was aided by higher capacity utilisation and better sales. According to the company's press release, sales during the quarter rose grew 30% year-on-year basis from ₹607.51 crore to ₹788.37 crore.

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"Increased volumes in truck tyres both radial and bias, LCV and Agricultural tyres have contributed to higher Sales. Cavendish operated all its three plants at 95% capacity utilisation and also achieved best ever operating efficiencies on several parameters during the quarter," said the company's chairman Raghupati Singhania.

He further added, "The demand recovery is quite robust across segments. Larger commercial tyres are also moving well with replacement demand clocking 30% growth and OEMs [Original equipment manufacturer] offtake slowly coming back. Cavendish looks forward to sustained improvement in sales and profitability in the coming period."

Meanwhile, tyre companies are expected to report decent volumes growth in the December quarter aided by the recovery in the automobile sector. However, commodity prices such as natural rubber, have seen

a sharp increase during the quarter and will remain a headwind going forward.