JK Tyre zooms over 6% after DAM Capital initiates coverage with buy rating

Shares of JK Tyre and Industries Limited closed 6.5 percent higher at Rs 273 on September 20 after brokerage firm DAM Capital initiated coverage with a buy rating citing improved brand image, better margins, and consistent market share gains.

Analysts at DAM have assigned a target price of Rs 315 on JK Tyre shares, implying an upside of 15 percent to the September 20 closing price of Rs 273.

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Consistent market share gains

The company has gained market share in the passenger car radial (PCR) tyre segment over the last 12-18 months. “It is expected that the market share level in PCR will improve with better product positioning and further availability of capacity through expansions,” analysts at DAM said in the note.

Premiumization-led margin expansion

The company has recently increased its focus on new product launches with better quality and premiumisation. Analysts are of the view that the contribution of high-margin premium products is steadily rising. “Brand equity of the company has also improved in the last 2-3 years, supporting the pricing power,” DAM said.

EV Push bodes well
JK Tyre has an array of EV tyres and is presently supplying EV tyres to various electric vehicles and original equipment manufacturers (OEMs) such as JBM, Ashok Leyland, Tata Motors, and Olectra Greentech. The report also added that the company is at the approval stage with several PV OEMs and is hopeful of increasing its EV tyres business exponentially in times to come.

On valuations, DAM expects its valuation discount to peers (CEAT and Apollo Tyre) to narrow down to 20-25 percent from the historical 40 percent.