JK Tyre and Industries Limited (JKTIL) reported better than expected profit numbers for Q4FY18. Consolidated revenue was up 6% yoy at Rs2,284cr, marginally better than consensus estimate. EBITDA surged 65% yoy to Rs329cr, while EBITDA margin expanded 512bps yoy to 14.4%. EBITDA was 31% higher than consensus estimate of Rs251cr. Consolidated PAT (after Minority Interest, Share in profit of associates and exceptional items) was up 64% yoy at Rs145cr. This was nearly thrice the consensus estimate of Rs53cr.
Revenue growth in Indian operations was sluggish growing just 2% yoy while Mexico operations de-grew 12% yoy. We believe that Mexican plant closure due to labour restructuring led to revenue de-growth in Mexico. We shall wait for management commentary on when the Mexican operations will stabilize.
Lower raw material expenses (5% yoy lower) and stable employee costs helped EBITDA grow 65% yoy and aided EBITDA margin expansion of 512bps. Even on a sequential basis, raw material cost was flattish.
Consolidated PAT growth was helped by stable depreciation, interest costs and higher other income. Tax rate was higher at 36% in Q4FY18 against 31%.
The Board of Directors declared dividend of Rs1.50 per share.
JKTIL is expected to benefit from the growing trend of radialization in Truck and Bus tyres, which is currently (FY18) at 47% and expected to go up to 50% in FY19. Secondly, stabilization of Mexico operations will provide trigger to revenue growth and margin expansion. Management commentary on time frame for stabilization will be keenly watched. Given that the CV segment is currently on an upswing, we expect JKTIL to be a major beneficiary.
JK Tyre & Industries Ltd is currently trading at Rs. 144.55, up by 1.25 points or 0.87% from its previous closing of Rs. 143.30 on the BSE.
The scrip opened at Rs. 145.35 and has touched a high and low of Rs. 145.90 and Rs. 143.50 respectively. So far 5,52,433 (NSE+BSE) shares were traded on the counter. The stock is currently trading above its 100 DMA.
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