Stock in Action – JK Tyres

Movement of Day

Analysis

The VWAP stands at 541.80, indicating potential price direction. stock's beta is 0.96, reflecting moderate volatility. market cap is ₹ 13,920 Cr. 52-week range is between 141.65 & 553.95, currently trading near high.
Pivot Levels: Classic pivot levels suggest current support at 525.28 & resistance at 540.82. Fibonacci levels align with Classic, while Camarilla points to tight range between 525.28 & 527.46.

Price Performance: Stock has shown positive performance across various timeframes: 3.55% in 1 week, 35.78% in 1 month, & impressive 218.46% over past year. This strong momentum may indicate potential opportunities for traders & investors. Technical analysis considers current uptrend, making it stock worth monitoring for potential further gains.

Probable Rationale Behind JK Tyres Surge

JK Tyre & Industries, major player in Indian Tyre Industry, recently showcased its future-ready products at Bharat Mobility Global Expo 2024. expo, themed 'Innovation for Future,' provided platform for industry leaders to exhibit their contributions to evolving landscape of mobility.

Product Innovation

JK Tyre's product exhibit at expo emphasized company's commitment to technological advancements. spotlight was on its highly sustainable tire, 'UX Green,' composed of 80% sustainable materials. This aligns with industry's growing emphasis on eco-friendly practices, reflecting company's dedication to responsible manufacturing. inclusion of Electric Vehicle (EV) tires also demonstrated JK Tyre's responsiveness to changing needs of automotive market.

Diverse Product Range

The company showcased diverse range of products, including flagship offerings like Smart Tyre & Puncture Guard Tyres for Passenger Vehicles, catering to safety & convenience. For Commercial Vehicles market, X-series product line (Xtra Fuel efficient, Xtra Mileage, Xtra Durability) underscored company's focus on efficiency & durability.

Immersive Expo Experience

Beyond product exhibition, JK Tyre created immersive experience for expo visitors with motorsport zone featuring go-karting activities. This interactive setup contributed to high footfall, engaging attendees & offering insights into brand's dynamic approach to future of mobility.

Financial Performance

(₹ in Cr.)

1. Despite recent market enthusiasm reflected in 31% surge in JK Tyre & Industries' shares over last month, it is essential to analyse company's financial performance. 

2. Earnings growth of 217% in last year & successful fund-raising of ₹ 500 crores through Qualified Institutional Placement (QIP) indicate positive momentum. However, investors should exercise caution & consider company's Price-to-Earnings (P/E) ratio, which, at 23.9x, appears lower than some market averages.

The Forecasts

While JK Tyre & Industries has demonstrated exceptional earnings growth, it's crucial to consider future projections. Estimates from experts suggest 26% annual earnings growth over next three years, surpassing market forecast of 19 %. Discrepancy between strong earnings outlook & seemingly conservative P/E ratio raises questions about investor confidence in company's ability to meet growth expectations.

Strategic Fund Utilization

The recently concluded fund-raising of ₹ 500 crores through QIP reflects JK Tyre's strategic approach to growth capex & balance sheet strengthening. Overwhelming response from marquee investors underscores market confidence in company's future prospects.

Market Dynamics & Growth Metrics

JK Tyre's impressive growth metrics, including 24% annual increase in Earnings Per Share (EPS) over last three years, indicate positive momentum. However, company's mixed results in last three years, coupled with market's scepticism reflected in P/E ratio, highlight potential risks.

Insider Alignment

Insider investment in JK Tyre & Industries, with significant stake worth ₹13 billion, signals leadership alignment with shareholders' interests. This insider confidence, combined with company's growth trajectory, positions JK Tyre as noteworthy entity for investors.

JK Tyre & Industries Ltd.’s (JK Tyre’s) Share Performance v/s BSE Sensex (April 2022 – March 2023) 

Plant Locations

(a) Jaykaygram, Rajasthan
(b) Banmore, Madhya Pradesh
(c) Mysuru Plant I, Karnataka
(d) Mysuru Plant II, Karnataka
(e) Mysuru Plant III, Karnataka
(f) Chennai Plant, Tamil Nadu

Automotive Industry

1. Financial year 2022-23 was first normal year post pandemic & factors such as new model launches, infrastructure growth & rebound in demand led to robust double digit sales growth both in domestic & exports by 20% during year. 
2. The industry took supply chain disruptions in its stride with efficient management & better availability of commodities, especially electronic items. Input costs, though concern, moderated over year. 
3. The growth in economy translated to MHCV sale growing by close to 40% & LCVs sales growing by 23%. In personal mobility sector, passenger vehicles sales jumped by 25% with UV segment registering nearly 33% growth. 2/3W sales, however, grew by 8% & has yet to touch prepandemic levels. Tractor Sales have grown by 10% during year.

The Tyre Industry

(Source: CRISIL, Industry Report – November 2023)

1. The Tyre Industry is not only capital intensive but equally material intensive process industry where input costs contribute approximately 70% to its cost of production. 
2. During year sector faced lot of headwinds in first half, with prime issues being raw material availability as well as high input costs. As year progressed commodity prices stabilised providing much needed relief. 

(Source: CRISIL, Industry Report – November 2023)
   

3. The rebound in economy & growth in OEMs provided tailwinds. after-market too recorded healthy growth. Overall exports slowed especially during last quarter. Radialisation reached level of 60% in commercial sector. 
4. The industry is extensively working & collaborating with auto industry on developing tyres for Electric Vehicles. Extended Producer responsibility for waste tyres is major regulatory requirement for industry.

The peers

7 domestic players are catering to majority of tyre demand.

1. JK Tyre
2. Apollo Tyres
3. Balkrishna Tyres
4. Bridgestone
5. CEAT
6. MRF
7. TVS Srichakra

Factors benefiting Indian tyre Industry  

1. Increasing demand for Vehicles
2. Higher vehicle utilisation
3. Rising disposable Incomes
4. Increasing premiumization of vehicles & tyres
5. Industry venturing into value added products
6. Growth in exports
7. Reduction in import of tyres

Conclusion

While surge in JK Tyre & Industries' shares has caught market's attention, investors should conduct thorough due diligence. Focus should be on understanding company's strategic initiatives, financial health, & its ability to sustain & exceed impressive growth observed in recent times. Future trajectory of automotive industry & JK Tyre's responsiveness to technological shifts will likely play crucial role in determining its long-term success.