JKTYRE - JK Tyre & Industries Ltd. Share Price

Management from JK Tyre & Industries provided an optimistic outlook during the Q4 FY25 earnings call, highlighting several key points. The Indian economy is projected to grow by approximately 6.5% in FY26, driven by resilient domestic demand and stable macroeconomic conditions. The automotive industry, crucial to India's growth, is expected to expand by 6-8% in FY26, benefiting from rising disposable incomes and infrastructure spending.

For JK Tyre, consolidated revenues for Q4 FY25 increased to INR 3,780 crores, with an EBITDA of INR 384 crores, reflecting a 15% quarter-on-quarter growth. The overall performance for FY25 showed consolidated revenues of INR 14,772 crores and an EBITDA margin of 11.4%. The company reported a 7.3% volume growth for the automotive sector, with notable contributions from the two and three-wheeler segments.

Management indicated a strong volume growth of double digits in both PCR (Passenger Car Radial) and TBR (Truck and Bus Radial) categories in the replacement market year-on-year. They expect ongoing projects worth INR 1,400 crores to enhance their production capabilities, and capacity utilization remains high across all plants at approximately 78%.

Looking ahead, JK Tyre plans to focus on innovation and sustainability, with a goal to cut greenhouse gas emissions by 50% by 2030. In the electric vehicle (EV) segment, they are well-positioned, with expectations of significant growth, targeting production of 1.33 million EV units by 2030, representing 20% of total passenger vehicle production.

Management also discussed stabilization in raw material prices, indicating a 2.5% decline quarter-over-quarter, with expectations of a slight decrease in the upcoming quarters. They also mentioned a commitment to strengthen their R&D, investing approximately 1.5% of turnover annually. Overall, JK Tyre continues to invest in enhancing dealer networks and service capabilities to drive future growth.

1. Question: "How is the company's growth in the electric vehicle segment?"

   • Answer: We are fully ready for EV tyre manufacturing, supplying major OEMs like Tata Motors and Ashok Leyland. We hold a 70% market share in bus segments and have significant presence in 2/3-wheeler EVs. EV buses now contribute 7% to the bus market, expected to rise to 10%. By 2030, we anticipate 20% of passenger vehicle production in India will be electric, and we are actively engaging with OEMs to capture this growing market.

2. Question: "What is the company's outlook on raw material cost in upcoming quarters?"

   • Answer: We experienced a 2.5% decline in raw material costs on a quarter-on-quarter basis. Moving forward, we anticipate raw material prices to stabilize, with a trend towards a marginal decline in the coming quarters.

3. Question: "Could you explain why Mexico was so weak, both in top line and margins for the fourth quarter?"

   • Answer: The weakness in Mexico's performance was attributed to the depreciation of the peso and uncertainty related to U.S. tariffs, which hampered customer confidence. However, there is growing demand in the Mexican market, and we expect better performance as these uncertainties diminish.

4. Question: "What would our outlook be for margins in Mexico?"

   • Answer: We expect our margins in FY'26 to be better than FY'25. With no tariffs on tyre exports from Mexico to the U.S. now, this will positively affect our revenues and profitability.

5. Question: "What is our capex spend for FY'26 and any remaining amounts?"

   • Answer: We're planning a capex spend of around INR900 crores for FY'26, completing existing projects. We have no new major expansion projects planned at the moment, keeping focus on current capacity enhancements.

6. Question: "Can we expect a revenue growth of 15% to 20% in Mexico due to peso appreciation?"

   • Answer: We are optimistic about revenue growth driven by larger domestic sales and exports. The depreciation of the peso benefits our export pricing, supporting our outlook for improved revenue and profitability.

7. Question: "What is the revenue guidance for the next two to three quarters from Mexico?"

   • Answer: Given the focus on domestic and Latin American markets, we anticipate better performance in FY'26. The new product launches and the resolution of tariff issues will further aid our growth expectations.

8. Question: "Can you share the volume growth across segments?"

   • Answer: In Q4, TBR & TBB segments grew about 7%, while passenger volume saw a 1% increase quarter-on-quarter. Replacement market volumes for passenger cars rose 23%, and truck radials grew nearly 18% year-on-year.

9. Question: "How do you see the competitive intensity and pricing environment?"

   • Answer: While we have raised prices in response to raw material spikes, the challenge remains in passing on costs in the market. Currently, we see stabilizing raw material prices, suggesting no immediate aggressive pricing from competitors.