JK Tyre & Industries (JK Tyre) reported 23% yoy growth in net sales to Rs1,051cr (Rs854cr), which was below our expectations. This was largely
because of lower-than-expected performance at the operating front due to a substantial increase in raw material cost. The company reported an OPM of
7.8% on account of the qoq increase in raw material cost. Net profit at Rs26.7cr (Rs13.6cr) came in below our expectations. Management is optimistic
about generating good volumes in FY2010 on the back of strong demand, capacity expansion across segments and the Tornel acquisition. The stock is
currently available at attractive valuations of 4.2x and 3.7x FY2011E and FY2012E EPS, respectively.
Angel Broking maintains a Buy on JK Tyre with a revised Target Price of Rs242 (Rs267), at which the stock would trade at 5x, 3.3x and 0.8x FY2012E EPS,
EV/EBITDA and P/BV, respectively.
