CMP: ₹167.85

JK Tyre (JKI) has delivered a strong performance in Q2-FY23, with EBITDA margin coming in at 7.9 per cent (down 187bps YoY/up 10bps QoQ), broadly in line with our estimate of 8 per cent, while Adj PAT exceeded our estimate by 4 per cent. Higher margin performance in India as well Mexico business improved overall profitability.

Its consolidated revenue grew by 26 per cent YoY and 3 per cent QoQ to ₹3,760 crore, 4 per cent above our estimate of ₹3,610 crore, while EBITDA grew by 2 per cent YoY and 4 per cent QoQ to ₹297 crore, 2.5 per cent above our estimate of ₹290 crore, due to better operating leverage and tight cost control despite higher RM prices.

Looking ahead, the management has guided for margin improvement for India as well as Mexico business due to commodity softening. In view of the strong products basket, regular price hikes, likely revival in replacement demand, healthy export potential, margin expansion in India as well as Mexico operations and valuation comfort at 7.6x FY24E, we reiterate our Buy rating on with a revised Target Price of ₹190 (vs. earlier ₹170), valuing the stock at an unrevised P/E multiple of 8.5x.