JK Tyre and Industries Limited witnessed a remarkable surge of 6.5 percent, closing at Rs 273 on September 20, driven by DAM Capital’s initiation of coverage with a buy rating. The brokerage firm cited several factors, including an improved brand image, enhanced margins, and consistent market share gains, for its positive outlook.
DAM Capital’s analysts have set a target price of Rs 315 for JK Tyre shares, signifying an impressive 15 percent potential upside from the September 20 closing price of Rs 273.
Consistent Market Share Gains
Over the past 12-18 months, JK Tyre has demonstrated a remarkable ability to capture a larger share of the passenger car radial (PCR) tyre segment. DAM Capital anticipates that this trend will continue to strengthen, driven by improved product positioning and expanded production capacity.
Premiumization-Led Margin Expansion
JK Tyre’s strategic shift towards introducing new, higher-quality products with a focus on premiumization is paying off. Analysts note that the contribution of high-margin premium products is steadily increasing. Furthermore, the company’s brand equity has experienced notable improvement over the past 2-3 years, bolstering its pricing power.
EV Opportunities
In the rapidly evolving electric vehicle (EV) market, JK Tyre has made significant strides. The company supplies EV tyres to a range of electric vehicle manufacturers and original equipment manufacturers (OEMs), including JBM, Ashok Leyland, Tata Motors, and Olectra Greentech. Additionally, it is in the process of securing approvals from several passenger vehicle (PV) OEMs, with expectations of substantial growth in its EV tyre business in the near future.
Valuation Outlook
DAM Capital anticipates that JK Tyre’s valuation discount compared to peers such as CEAT and Apollo Tyre will narrow down to 20-25 percent from the historical 40 percent. This suggests a positive shift in market sentiment towards the company’s growth prospects.
Investors are now closely monitoring JK Tyre as it continues to strengthen its market position and capitalize on the evolving trends in the automotive and EV sectors.
