JK Tyre stock soars 14% to all time high as net profit rises 398% in Q2

Shares of JK Tyre and Industries, the flagship company of the JK Group, surged over 14% during intraday trading on Thursday, reaching an all-time high. This impressive performance came on the heels of the company's September quarter earnings, which exceeded market expectations.

On Wednesday, the company posted a 398% surge in its consolidated net profit to ₹249 crore. In the same period of last year, the company reported a net profit of ₹50 crore, and in the preceding June quarter, it recorded a net profit of ₹159 crore.

The revenue from operations surged to ₹3,905 crore in Q2FY24, compared to ₹3,726 crore in a similar quarter last fiscal. It reported an operating profit of ₹597 crore in Q2, an increase of 96% when compared to ₹305 crore in the year-ago quarter.

The EBITDA margin reached 15.3% in Q2, demonstrating significant year-over-year growth of 718 basis points (bps) and 280 basis points (bps) quarter-over-quarter. This improvement was attributed to enhanced operational efficiencies, product premiumization, and favorable movements in raw material prices, the company said in its earnings report. 

Also Read: Tyre makers brace for margin squeeze as oil prices soar

Domestic sales volumes showed an 8% increase in Q2, compared to the corresponding quarter. Notably, the company's net debt decreased from ₹4,518 crore as of March 2023 to ₹4,087 crore as of September 2023, marking a reduction of ₹431 crore. 

Following the company's impressive numbers, JK Tyre and Industries saw a robust start to Thursday's trading session, with its stock opening at ₹344 per share, a significant increase from the previous day's close at ₹308.15. It continued to perform well, reaching a peak of ₹351.25 per share, reflecting a remarkable 14.02% increase.

JK Tyre Industries is the country’s third largest and globally among the top 25 tyre makers. The company's product portfolio includes automotive tyres for two-wheelers (2W), three-wheelers (3W), passenger cars, utility vehicles (UVs), trucks and buses, and off-the-highway (OHT) vehicles.

Earlier in September, domestic brokerage firm DAM Capital initiated coverage on the stock with a target price of ₹315 apiece. However, the stock crossed the brokerage's target price in today's trade.

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

The brokerage said that the company has gained some market share in the PCR and 2W/3W segments over the last 3 years on the back of capacity additions. It believes that its market share gain to the tune of 20–30 bps in PCR would aid volumes in FY24–25.

The brokerage highlights the company's focus on premium categories with new launches in the PV segment, new products in various categories, and its foray into the high-value EV segment. The brokerage believes this will lead to a rise in average realisation.

"Successful turn-around of the subsidiary in India and margin expansion in Mexico would improve the consolidated financials. Better margins, its steady deleveraging process, and improved brand equity are expected to expand valuation and lower the discounts to peers," said the brokerage firm.

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