Strong exports and replacement demand offset OEM slowdown, as company navigates raw material costs and domestic market fluctuations in Q1 FY25.
03 Aug 2024 | 6470 Views | By Shahkar Abidi
JK Tyre & Industries, the flagship company of JK Organisation, has reported a robust 33% year-on-year (YoY) jump in net profit to Rs 212 crore for the first quarter of the current fiscal year. The company's strategic focus on premiumization, coupled with successful price pass-through of raw material cost increases ...
This is an Autocar Pro Plus article. Subscribe to continue reading.
JK Tyre & Industries, the flagship company of JK Organisation, has reported a robust 33% year-on-year (YoY) jump in net profit to Rs 212 crore for the first quarter of the current fiscal year. The company's strategic focus on premiumization, coupled with successful price pass-through of raw material cost increases and a surge in exports and replacement demand, has been the primary driver of this growth.
While JK Tyre's net profit soared, its operating revenue experienced a marginal 2% YoY decline to Rs 3,655 crore. This can be attributed to a slowdown in demand from original equipment manufacturers (OEMs), which now account for 21% of the company's sales compared to the FY24 average of 23%. Conversely, the replacement market has witnessed a growth spurt, contributing 62% to the company's sales in Q1 FY25, up from 61% in FY24. A notable highlight is the company's export performance, which has surged to 17% of total sales in Q1 FY25 from 16% in FY24. Key markets like the Americas, Brazil, Europe, the Middle East, and Asia have shown significant traction.
Anshuman Singhania, MD of JK Tyre, stated during a post-results conference call with the media that exports to geographies such as the Americas, Brazil, Europe, the Middle East, and Asia have been witnessing good traction. With earlier inventories, particularly in the US market, fresh demand seems to be coming back. "Our participation in these geographies is giving good results," said Singhania.
On the demand in the domestic market, Singhania pointed out that there has been some sluggishness in demand for commercial vehicles arising from the election-related slowdown. However, now that elections are over, demand in the domestic market is once again expected to revive, particularly with the lineup of infrastructure and construction projects, the push in rural markets, a good monsoon, and the upcoming festive season.
Talking about the price increase in raw materials, especially those of natural rubbers, Anuj Kathuria, President (India) of JK Tyre, stated that the raw material basket witnessed an increase of 3-4% on a quarter-to-quarter (QoQ) basis, and is expected to increase further in the coming quarter (Q2). The company, on its part, has been able to successfully pass on the price increase to the customers, thereby keeping its margins at a healthy level.
India's automotive tyre market is a significant contributor to the overall economy. The sector is characterized by a mix of organized and unorganized players, with a growing preference for branded and higher-quality tyres. The market has witnessed steady growth, driven by increasing vehicle ownership, infrastructure development, and rising disposable incomes. However, the industry also faces challenges such as raw material price fluctuations, intense competition, and stringent emission norms.