JKTYRE - JK Tyre & Industries Ltd. Share Price

Management's outlook for JK Tyre & Industries Limited is optimistic, driven by strong economic growth in India, which remains the world's fastest-growing major economy. They reported a Q1FY26 GDP growth of 7.8% and anticipate a full-year outlook of 6.8%. Factors such as reduced GST rates on tyres from 28% to 18% and substantial growth in auto sales by 10% in Q2 are expected to enhance overall demand in the sector.

Key forward-looking points from management include:

1. Revenue Growth: Consolidated revenues achieved an all-time high of Rs.4,026 crores, marking a 10% increase YoY. Management aims for double-digit revenue growth in FY26.

2. Profitability: Consolidated EBITDA rose to Rs.536 crores with a margin improvement to 13.3%, up from 10.9% in Q1, attributed to increased sales volumes and favorable raw material prices.

3. Market Dynamics: The company is seeing growth in the commercial vehicle and passenger car segments, projecting mid-single-digit growth for these categories and high single-digit growth for farm equipment and two/three-wheelers.

4. Cost Benefits: JK Tyre has passed on the full benefit of GST reductions to customers, helping to improve consumption in commercial vehicles and accelerate the replacement cycle.

5. Capex Plans: JK Tyre is investing Rs.1,200 crores in three key expansion projects, expected to enhance capacity significantly, set to start production by Q3FY26.

6. Export Performance: Exports show strong growth, with a 13% QoQ increase despite external tariff uncertainties, focusing on diversifying geographic market reach.

7. Future Margin Outlook: Management anticipates EBITDA margins sustaining between 13% to 15% over the next few quarters due to controlled raw material costs.

With robust operational highlights, management expresses confidence in the company's capability to not only meet increasing demand but also improve overall market share across various segments.

Question: What is the outlook for full year capex and how do you see the working capital normalization in the coming quarters?

Sanjeev Aggarwal: We incurred about Rs.610 crores in capex during the first half and expect a similar amount in the second half, totaling Rs.1,200 crores for the year. This includes maintenance capex. We intentionally increased finished goods in anticipation of the festive season, but working capital should normalize soon, allowing for good free cash flow generation.

Question: Can you provide a breakup of the growth capex and the segments being invested in?

Sanjeev Aggarwal: We're focusing on three projects: Rs.1,025 crores for Passenger Car Radial in Banmore, Rs.261 crores for TBR in Laksar, and Rs.112 crores for All Steel Light Truck Radial in Mysuru. Production from these will commence in Q3, ramping up over six months.

Question: How do you see raw material prices impacting margins in the upcoming quarters?

Anshuman Singhania: We expect raw material prices to remain range-bound, which should aid margin expansion. The recent drop in natural rubber prices will also positively impact our margins.

Question: Any price adjustments to pass on raw material reductions in the previous quarter?

Anshuman Singhania: No price revisions have occurred. We have not made any cuts in the replacement market to reflect the reduction in raw material costs.

Question: What is your plan B regarding exports amidst US tariff uncertainties?

Anshuman Singhania: Our exports grew by 13% QoQ. We are redirecting our production to other regions, compensating for US markets. We've shifted focus to countries like Mexico, Latin America, and are exploring additional markets, which will help maintain margins.

Question: Can you provide guidance on sustainable EBITDA margins over the next two to three quarters?

Anshuman Singhania: We anticipate sustaining EBITDA margins in the range of 13% to 15% as we navigate costs and demands effectively.

Question: Can you share the average realization rate in terms of rupee versus Mexican peso this quarter?

Anshuman Singhania: On a QoQ basis, our revenue grew by 26% in rupee terms, and by 20% in constant currency (Mexican peso), benefitting from a 7% depreciation of the rupee against the peso.

Question: What is the capacity utilization and how would it change with upcoming expansions?

Sanjeev Aggarwal: Current overall utilization at JK Tornel is around 80%, with radial utilization at approximately 88%. We plan a 15% increase in capacity through our upcoming capex, expected to be implemented by Q4 FY26.

Question: Given strong demand, how prepared are you for supply till new capacity comes online?

Anshuman Singhania: Our new capacities will increase by 12-13%. We start partial production in Q3, ensuring we can meet demand without loss of sales until full capacity ramps up in subsequent months.

Question: What is the guidance for revenue growth in the second half and the next financial year?

Anshuman Singhania: We are confident in achieving double-digit revenue growth moving forward, supported by robust demand projections.

Question: Have you seen a market share increase in the OEM segment, particularly for passenger cars?

Anshuman Singhania: Yes, since the GST cut, our market share in the OEM segment for CVs is strong, alongside significant traction in the replacement market, especially for passenger cars.