New Delhi: Owing to steady demand and softening of commodity prices, JK Tyre & Industries is targeting to improve its operating margins in the current fiscal year. The margins stand below the pre-covid levels.
“For FY23, the margins remained flat because in the first two quarters there were pressures on the raw material front. Moving ahead, we expect the input cost to remain stable. While we did not touch the pre-covid margin level this year, we are making efforts to reach our long term average of about 11-12%,” Sanjeev Aggarwal, Chief Financial Officer, JK Tyre told ETAuto.
The company posted a net profit of INR 263 crore during the fiscal year ended March 2023, up 31% as compared to INR 201 crore in the year-ago period. Revenue went up to INR 14,645 crore as against INR 11,983 crore in the last fiscal.
During the January-March quarter, the company’s margins improved to 10% from 7% in the year-ago period, marking an increase of 360 basis points.
During the fourth quarter of FY23, the company reported over two-fold growth in its consolidated net profit to INR 112 crore. This comes on the back of robust demand in the domestic market for both passenger and commercial vehicle radial tyres. The company had reported a net profit of INR 38 crore in the corresponding quarter of FY22.
The tyre maker said its subsidiaries Cavendish Industries and JK Tornel, Mexico performed well during FY23 on account of improved volumes, revenues and profitability.
The company’s board recommended a dividend of INR 2 per share having a face value of INR 2 each for the financial year ended March 31, 2023.
IFC, a member of the World Bank Group, has invested INR 240 crore (USD 30 million) in the company by way of CCDs.
Demand Outlook
Anshuman Singhania, Managing Director, JK Tyre is positive about the growth in the tyre industry. With improvement in semiconductor availability, rising disposable income, uptick in economic activities, and good momentum of infrastructure projects, he expects a “strong double-digit growth in the topline” during FY24.
To meet its growing demand, JK Tyres had earlier embarked on two capacity expansion projects of INR 790 crore in Gwalior. First is of INR 530 crore for passenger car radial (PCR). Second is of INR 260 crore for its subsidiary Cavendish Industries to cater to the truck and bus radial (TBR) tyres. The expansion work is in progress and both the projects will be commissioned in the later part of FY24.
Anuj Kathuria, President, JK Tyre & Industries expects the replacement demand to stay buoyed this year. Even during the Q4 FY23, there has been overall volume growth of 3% over the corresponding quarter of last year.
“JK Tyre reported about 11% growth in truck radial and about 20% for passenger car radial tyres. On the replacement side, the month of May is very robust. We expect strong demand across PVs and CVs,” he said.
“Even the farm sector which has been muted for almost about a year will see some light. Two and three wheelers also give purchase indications. “While we are not seeing any positive offshoots but with the onslaught of monsoon and rural demand picking up in this segment. Overall we do not see any greater challenges in the short term,” Kathuria added.
Exports Market
JK Tyre said exports remained subdued in FY23. The company exports to over 110 countries including regions in Asia, Middle East, and some parts of Europe. Its larger footprint is in the US, and is now focusing on African and Latin markets to expand its channel reach and go deeper to penetrate further.
The company’s MD is hopeful of exports normalizing in the current financial year. “Going forward with gradual normalization, in the channel inventory, we see improvement in chronic conditions in several markets,” he said.
JK Tyres offers EV tyres across the segments including CVs, PVs, two wheelers and three wheelers. Singhania said the tyre maker “is in advanced talks” with various companies across the segments to launch new products as per their requirements.
The Company has 12 manufacturing facilities globally, including 9 in India and 3 in Mexico. It has a network of over 6000 dealers and 650 brand shops called as Steel Wheels, Truck Wheels and Xpress Wheels.
