JK Tyre share price hits 52-week high, up 120% in 7 months; should you buy, sell or hold?

JK Tyre share price surged almost 17 per cent in intraday trade on BSE to hit its fresh 52-week high of ₹315 and extended the gains into the second consecutive session on Wednesday, October 12. JK Tyre share price opened at ₹273.95 against the previous close of ₹270.15 and jumped 16.6 per cent to the 52-week high of ₹315 on BSE.

The stock finally closed 15.27 per cent higher at ₹311.40. 

While there is no immediate fundamental trigger for the stock, technical analysts observed that the stock breached the level of ₹290 which it had been struggling to cross for some time.

JK Tyre share price hit its 52-week low of ₹141.65 on BSE on March 20, 2023. In about seven months, this stock has jumped about 120 per cent. On a monthly basis, the stock has been gaining since March this year.

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Should investors buy, sell or hold?

Fundamental experts are positive about the stock for the long term.

Brokerage firm Emkay Global Financial Services has initiated coverage on JK Tyre with a buy recommendation, pegging the target price of ₹415, implying a 55 per cent upside potential.

Emkay believes JK Tyre stock price can potentially double over three years.

"Based on structurally strengthened positioning across growth, margin and BS parameters which are seen propelling RoCE (return on capital employed) to about 21 per cent in FY26E versus nearly 11 per cent in FY23, we argue that JK Tyre’s valuation should start converging towards larger peers, thereby driving substantial value creation," said Emkay.

Emaky believes that JK Tyre’s improved competitive standing, premiumisation efforts and cost controls would drive margins to 14 per cent by FY26E. Judicious capex and deleveraging thrust (25 per cent long-term debt reduction planned by FY26) would drive net debt/EBITDA to about 1.4 times in FY26E versus 3.5 times and 4.7 times in FY23 and FY22, respectively.

Apart from the company's fundamentals, Emkay is positive on the tyre sector's prospects which is expected to be a significant boost for the sectoral player like JK Tyre.

"The domestic tyre industry’s structure has improved in recent years, amid (i) more than 80 per cent drop in imports of key categories like TBR (truck and bus radial tyres) and PCR (passenger car radial tyres), after the government’s imposition of import restrictions, (ii) sharp improvement in export competitiveness and exports, (iii) premiumisation trend playing out in four-wheelers (rising SUV share in passenger vehicles, rising radialisation in trucks and buses), and (iv) controlled capex spending amid focus on profitability and return ratios," said Emkay.

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While JK Tyre stock still appears to be a decent buy for the long term, technical analysts recommend booking some profit in the stock. They say fresh longs can be initiated in the stock after some correction.

Gaurav Bissa, VP at InCred Equities observed JK Tyres has been in a strong uptrend with the formation of higher highs and higher lows.

"The stock bounced from ascending channel pattern support on the weekly charts. The stock recently witnessed a six-year breakout on the back of incremental volumes which pushed the stock from ₹200 to almost ₹300," said Bissa.

"While the trend remains strong, the pattern targets have been achieved suggesting partial profit booking at the current levels can be a good strategy. Investors can hold the balance quantity to ride the uptrend. Those who wish to buy the stocks should wait for a correction towards ₹220 which will make the risk reward lucrative," Bissa said.

Also Read: Potential Multibagger: Ventura Securities sees 101% upside in this stock

Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers pointed out that for the last 45 sessions, this stock has been trading in a tight range between ₹260 and ₹290.

In the last couple of weeks, it has struggled to get over ₹290 level which is a matter of concern, Patel observed.

"On the indicator front, weekly DMIs are looking overstretched because the ADX line is trading above both DMIs, which may call for some correction in the coming few weeks. Support is expected near ₹260, and resistance is seen near ₹290, followed by ₹295. As of now, fresh longs are not advised," said Patel.

Foram Chheda, CMT, and the founder of ChartAnalytics.co.in, pointed out that the stock has displayed an upward trend, surpassing crucial moving averages including the 50-day, 100-day, and 200-day moving averages. However, it encountered resistance around ₹285-290 levels in August, retracing briefly before consolidating near the 50-day moving average.

"The recent attempts to breach this resistance zone at ₹290 level suggest a potential 7-8 per cent uptick upon a closing price above ₹290. Those holding can maintain their positions, but a dip below ₹269 warrants consideration for exiting. Stay vigilant for a breakout above ₹290, signalling a favourable entry point," said Chheda.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.