JK Tyre expects strong domestic demand but has a word of caution; Stock at record high

JK Tyre Ltd., one of India's leading tyre manufacturer is confident that domestic tyre demand will be robust in the second half of financial year 2024. The demand, according to the management will be strong in both the OEMs as well as the replacement market.

Shares of JK Tyre are trading with gains of 10% on Thursday after making a record high of ₹351.25 in today's trading session.

The company's India unit President, Anuj Kathuria, in a post-earnings interaction with CNBC-TV18 said that the export markets will be good in the second half of the current financial year.

For the September quarter, exports contributed 17% to the company's overall topline, while replacement business contributed to 60% of sales.

JK Tyre reported a 720 basis points EBITDA margin expansion when compared to the same quarter last year, aided by lower raw material costs. It reported an EBITDA margin of 15.1% from 7.9% last year.

Kathuria said that besides the margin, the company's margin were also aided by operating leverage.

"I would also like to share with you that on the product side, we have been able to get our premium products, whether it is in the PCR segment or even in the truck and bus radials, the premium products have taken a larger share in the overall pie. So that helps us to improve the margins," he said.

He also attributed a part of the margin improvement to the cost reduction efforts undertaken by the company.

Despite lower input costs aiding the company's margin during the quarter, Kathuria said that the company will watch the Raw Material basket "very carefully."

He also said that the company remains cautious due to global headwinds.

"Overall, the six months period in the second half of the fiscal, should be good for demand. However, we will have to watch it carefully. There are certain global headwinds considering the geopolitical situation. But other than that, I think some of the economies where we have presence in the international markets, those should be doing fairly well," Kathuria said.

Shares of JK Tyre are currently trading 8.75% lower at ₹335.10.