The tyres that carry us across continents and down dusty paths are often an afterthought. Yet JK Tyre and Industries Ltd recognizes their critical role in the transportation industry.

JK Tyre has carved its niche in the Indian market, becoming the undisputed leader in truck and bus radial tyres. Their commitment translates to efficient and safe movement of goods and people across the nation’s vast network. 

JK Tyre’s ambition extends beyond dominance in a single segment. They offer a comprehensive range of tyres catering to diverse needs. Their innovation shines through with the development of “ Smart Tyre” technology, a pioneering system that monitors tyre pressure and temperature, enhancing safety and fuel efficiency. 

Come, Let’s delve deep into the concept and see if there is any investment opportunity available in the market.

Industry Overview Of JK Tyre

The global economy has been facing persistent challenges over the last two years, with the aftermath of the pandemic, geopolitical turmoil, soaring commodity prices, and skyrocketing inflation. However, India has remained one of the fastest-growing economies, with its nominal GDP touching US$ 3.5 trillion and clocking a growth of nearly 7% (estimated) for the financial year 2022-23.

The resilience of the Indian economy was evident, driven by a rebound in consumption, increased infrastructure spending by the government, and a good monsoon supporting agricultural growth. The automotive industry, a significant contributor to India’s GDP and employment, witnessed a robust double-digit sales growth of around 20% during the financial year 2022-23.

Factors such as new model launches, infrastructure growth, and a rebound in demand fueled this growth. The industry also sustained its focus on green mobility, with rapid growth in electric vehicle sales across categories, aided by improved EV infrastructure and superior performance.

The tyre industry, a capital and material-intensive process industry, faced headwinds in the first half of the year due to raw material availability issues and high input costs. However, as commodity prices stabilized, the industry benefited from the rebound in the economy and growth in original equipment manufacturers (OEMs).

The after-market segment also recorded healthy growth, though exports slowed during the last quarter. Radialisation reached a level of 60% in the commercial sector. The industry is extensively collaborating with the auto industry to develop tyres for electric vehicles, while also addressing the regulatory requirement of extended producer responsibility for waste tyres.

Overall, the outlook for the automotive and tyre industries remains positive, supported by government initiatives and India’s expected position as the third-largest market globally by volume by 2030.

Company Overview Of JK Tyre

JK Tyre and Industries was incorporated on February 14, 1951 as a private limited company under the name JK industries Ltd. The company is engaged in a business of manufacturing a wide range of tyres to diverse business segments which include Truck, Bus, Passenger cars, MCV (Multi utility vehicles), LCV (Light Commercial Vehicles) and Tractors.

JK Tyres operate in over 105 countries and have a network of over 180 distributors to sell their tires. The company makes around 35 million tires a year in their 12 sustainable manufacturing facilities, 9 located in India and 3 in Mexico. JK Tyre also has a strong sales network consisting of over 4,000 dealers and more than 500 branded stores called Steel Wheels and Xpress Wheels.

JK Tyres is the first company in India with tubeless passenger radials and OE fitment and it is the first company in India to launch high performance Z, V and H rated passenger radial tyres. Their customers include Maruti Suzuki, Eicher, Ashok Leyland, TVS, Mahindra and Tata Motors.  

The company is currently trading in the range of 410 – 430, the company hit its all time high of 553.95% on 5th of Feb 2024 and because of increased profit booking the share price came low despite having good financial performance.

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Financials Of JK Tyre

In the Financial year 2023, JK Tyre and Industries  saw a substantial increase in revenue by 22.21% to reach 14,644 crores as compared to 11,982 crores in FY 2023. Looking at their three years, encompassing FY 2021 to FY 2023, the company displayed a good compound annual Growth Rate (CAGR) of 18.85% in revenue. 

JK Tyre in FY 23 also increased its net profit margin by 32.17% to 264.74 crores as opposed to 200.3 crores in FY 22. 

This increase in revenue and net profit happened because of growth in the domestic automotive industry transmitting to higher tyre demand and increased innovations like smart tyres and EV – specific tyres. 

In FY 23, JK Tyre maintained favorable financial metrics with a Return on Equity (ROE) of 9.56% and a Return on Capital Employed (ROCE) 10.26%

Future Plans Of JK Tyre

JK Tyre and Industries plan to aggressively increase volumes across product categories like Truck, Bus, Passenger 2 and 3 wheelers, Off the road in both replacement and export markets. They wanted to achieve this by expanding their distribution reach through setting up more exclusive JK Tyre brand outlets across India.

JK tyre focuses on enhancing their sales in electric vehicle (EV) specific tyre range with ultra-low rolling resistance for buses and cars in domestic and international markets. They wanted to expand their geographical footprint further in key markets like Australia, Europe and South Africa by widening their product portfolio offerings.

JK tyre aims to reduce their debt by utilizing improved profitability and cash flows to deleverage the balance sheet. The company also develops technologically advanced and eco-friendly tyre products aligned with evolving market requirements and demand for sustainable offerings. They are increasing their focus on higher profit margin and premium tyre categories like higher inch sizes (>16 inch) in passenger cars.

They also wanted to cover various sustainability initiatives under their 5P framework covering areas like resource, productivity, environmental protection, community development and employee wellbeing. They focus on specific goals like reducing greenhouse gas emissions, water consumption, increasing renewable energy usage and attaining global benchmarks. 

Conclusion

JK Tyres and Industries Ltd isn’t just a name in the Indian tyre industry, it’s a symbol of reliable movement. For decades, their dominance in the truck and bus radial tyre segment has ensured the smooth flow of goods and people across the nation. 

JK Tyres understands that a responsible journey requires a focus beyond the road itself. This is where their commitment to sustainability comes in. JK Tyres ensures they’re not just manufacturing tyres, they ‘re taking a holistic approach towards securing a greener future. 

By embracing technological advancements and staying committed to environmental responsibility, they are well positioned to not only maintain their dominance in India but also become a global force shaping the future of the tyre industry. 

Do let us know your thoughts in the comments below.

Written by Pavunkumar V M

By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investments.

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