India’s JK Tyre has reported a significant decline in profit for the second consecutive quarter, primarily due to sluggish demand from truck and bus customers. In the third quarter, the tyre manufacturer’s profit plummeted by 77% to 515.2 million rupees ($5.92 million), down from 2.21 billion rupees in the same period last year. Revenue experienced a slight decrease, totaling 36.74 billion rupees. The company’s expenses increased by 7%, driven by a 6% rise in raw material costs.
The Indian tyre industry is facing challenges due to weak demand for new vehicles this fiscal year, with those companies more dependent on sales to truck and bus customers being particularly affected. JK Tyre derives at least half of its revenue from these customers, with the figure reaching as high as 80%-90% in its domestic market. While commercial vehicle sales saw a modest increase of 1.2% during the quarter, this was outpaced by an overall auto sales growth of 3.1%, according to industry data.
Analysts’ estimates for the next 12 months reflect varying sentiments towards different tyre manufacturers. JK Tyre has a mean price-to-earnings ratio of 9.05 and is rated as a “Buy” by four analysts. Apollo Tyres also holds a “Buy” rating with a P/E ratio of 13.73, while MRF is rated as a “Sell” with a P/E of 21.62. CEAT is rated as a “Buy” with a P/E of 17.37.
Overall, the tyre industry in India is navigating a challenging landscape, with JK Tyre’s latest financial results highlighting the impact of reduced demand in the commercial vehicle sector.
