JK Tyre & Industries Limited analyst Q&A

Thank you very much sir. We will now begin the question & answer session. The first question is from the line of Mr. Basudev Banerjee from CLSA. Please go ahead.

Thanks. Congrats for a good set of numbers. Just a few questions. First question is for Sanjeev sir. From the cash flow statement, almost Rs.610 crores of capex in first half and as you said working capital increased this quarter and that's how one can see gross debt more or less to have remained unchanged. So, what is the outlook for full year capex and how do you see the working capital normalization in coming quarters so that one can see a good free cash flow generation in second half?

Thank you. So, this is regarding the total cash available what we have incurred so far in the first half of FY2026 which is about Rs.610 crores and almost the equal number which is about Rs.600 crores roughly is going to be spent in the second half as we receive machines for the projects which are under implementation. So, Rs.1,200 crores of the total cash outflow is scheduled for this year and this includes some amount towards the normal maintenance capex as well. And as far as the working capital is concerned th ere was intentional addition to the finished goods because we wanted to be ready for the festive season but I think going ahead, the working capital reduction would be there and we are hoping that with working capital will come back to its normal levels.

And can you give some breakup of the growth capex which segments you are investing in using this Rs. 1,200 crores?

So, we have been implementing three projects , one is for the Passenger Car Radial (PCR) at a cost of Rs.1,025 crores at our Banmore plant in Madhya Pradesh. The second expansion is for Laksar tyre plant in Uttarakhand and this is for TBR category at a cost of Rs.261 crores and the third one is for the All steel light truck radial tyres (ASLTR) of Rs.112 crores which is going on at Vikrant tyre plant, Mysuru. So, these three projects put together will come up for production in the Q3 and the full ramp up will then gradually take place over the next 6 months period.

And overall utilization as of now would be what close to 85%?

Capacity Utilization is more than 90% for the radial categories where we are expanding and this is going on very well in fact.

Second question, as you mentioned about raw material basket was down 3% QoQ and one can see that natural rubber prices are down to Rs.185/kg from Rs.205 approx. in August. So how do you see in December & March quarter other than the crude price correction, which is pushing up the margin now, the natural rubber price correction should aid margin improvement further , any comments on that?

Yes, we expect the raw material price to remain rangebound in the coming quarters and definitely it will help us in the margin expansion.

Last question, has there been any price cuts to pass on the raw material reduction in last quarter in any segment in the replacement market?

No, there has been no price revision.

Okay sir thanks that's all for my side.

Thank you.

Thank you. The next question is from the line of Rehan Syed from Trinetra Asset Managers . Please go ahead.

Good afternoon to the team and thank you for giving me the opportunity. I have only one question, I want to understand regarding the exports side. So, your export grew 14% QoQ despite the US tariff uncertainty. I want to understand what is your plan B in case tariff strength wasn't in current year ‘26 and are you reallocating volumes to other geographies or increasing product mix of higher margin SKUs to offset the impact & What is the management’s view on this?

Export grew by 13% QoQ and our exports to USA are only approx. 3% from the total revenue which we have successfully diverted to other countries where we are already supplying, namely Mexico, Latin America, Brazil . W e have been able to divert these supplies and our strong markets being Middle East and even Southeast Asia which we are exporting and we are also exploring new markets like EU and UK and even Africa. So that will be our continuous focus going ahead.

So, do you think it will compress our margins?

No, it will not impact our margins rather it will improve the margins.

Just to clarify that because we have already diverted a lot of our exports which were going earlier to US market, as Anshuman ji mentioned, we are also eyeing on the proposed trade deal with USA which will act as an additional opportunity for us to export to that market.

Okay. I want to ask i f you could give any guidance for EBITDA margin that you can sustain over the next two to three quarters?

So, margins are going to be in the range of 13% to 15%.

Okay that’s it from my side and thank you so much and good luck for the coming quarter.

Thank you.

Thank you. The next question is from the line of Abhishek Kumar Jain from AlfAccurate. Please go ahead.

Thanks for the opportunity and congrats for the strong performance. So, my first question is on the Mexico business . What was the average realization in terms of the rupee versus Mexican peso in this quarter and now that rupee versus Mexican peso has moved at around INR4.8 in last 2-3 months which is very much positive for your company. Just wanted to understand what benefit you will get because of this currency movement.

In rupee terms, our revenue growth has been 26 % on a QoQ basis and in terms of constant currency i.e. Mexican peso , growth has been 20 % on a QoQ basis and we have seen that depreciation of Rupee to Mexican peso by around 7%.

Average realization because there are number of SKUs , number of products so this is not possible but definitely it has gone up and we have taken the benefit of depreciation of rupee and going forward also if this continues then I think we will gain further.

How is the demand scenario in domestic and exports side both?

It is very good , it is improving further and we are expecting that the Mexican exports to USA should be better because Mexico is now going to conclude a deal with USA and as I mentioned in my opening remarks about US-Mexico-Canada-agreement (USMCA), we are hopeful that going forward we will be able to maintain and improve our sales as well as our margins.

And adding to that , we are strengthening our push within Mexico itself and to Brazil and LATAM which we are exporting from Mexico . W e are expanding by adding new channel partners as well, so we see a good opportunity in terms of higher demand coming in from these countries.

So, what sort of value we can see in the Mexican business in the coming quarters, we have seen very good growth in this quarter i.e. 8% YoY growth. But if we see the past number then we were doing around Rs.700 crores kind of the revenue from the Mexico 1.5 years back, so can we achieve that number again?

We see a continuous growth , as I and Mr. Bajoria already said that we are finding new market opportunities to expand our dealer base and looking for white spaces in Mexico and new export countries from Mexico. We are also enlarging our offerings by development of newer products, so we see a healthy growth coming in for the whole year.

My next question is on the domestic side; we have seen very strong growth in the replacement business that has gone up by around 2 2% YoY in this quarter and basically T BR replacement demand was very much strong so what are the green shoots visible in the T BR replacement segment and how it will be sustainable?

So, we have seen a comeback of OE demand in the CV segment (for LCV/ SCV bias tyres), which was earlier muted. We see that in the replacement market right now the inventories of tyres which the dealers were carrying in, that has been flushed out and thanks to GST 2.0 it has brought in a lot of demand surge there and we see with the better monsoon and better infrastructure push by the government , clubbed with rural demand coming in , a positive trajectory of demand . So, all that augers well in terms of demand for our truck radial tyres . Going forward, we see all categories should do well in the replacement as well.

So, in the overall TBR business how much contribution of LCVs in your segment?

How much contribution of the LCV in overall segment?

Overall, 60% is contributed by commercial vehicle as MD sir said and out of which LCV, SCV and MHCV there are various segments. Broadly, the LCV& SCV space contributes mid -single digits to the India revenues.

And how is the mix in the TBR versus TBB?

TBR is around 40% to 45% and TBB would be around in the range of about 10% to 13%.

Thank you, sir, that's all.

Thank you.

Thank you. The next question is from the line of Aditya Akhani from Shah Capital. Please go ahead.

Thank you for the opportunity. Two questions from my side. I wanted to understand market and product category mix for Q2FY26 of India operation.

So, value wise the category mix is around 57% in truck space (TBB & TBR), around 30% passenger line radial, 2/3w at 4% and Non truck bias would be about 10%.

And market mix?

Replacement is 63%, OE is about 24% and our export would be about 13%.

Standalone number shows drop of Rs.173 crores versus Q1 while India revenue has moved up by Rs.63 crores in same period. Can you throw some light on Cavendish performance?

There is no specific reason between the two quarters , let's say if the demand for the product by the OEM from JK Tyre is higher or it could be higher for the CIL tyre s. So, in order to remove this kind of confusion this entity will get merged by the next quarter and there will be only one company. So, this depend upon the OEM requirements to be catered to from which company. For us it is the same thing India operations.

Okay thank you.

Thank you for the opportunity and congratulations on a good quarter. My question is regarding JK T ornel. I wanted to understand what is the capacity right now and what is the capacity utilization as well?

The installed capacities are around 59 lakh tyres and the overall utilization including radial and bias is approximately 80% but the radial utilization is higher at nearly 88% in JK Tornel, Mexico.

In the next round of Capex how much will this capacity increase by?

It will increase by about 15%.

And this is all for passenger car radial, right?

PCR that is correct.

And this will be achieved by December?

No, it will be available from Q4’FY26.

Okay thank you.

Thank you. The next question is from the line of Puneet Javeri from Javeri & Companies. Please go ahead.

Thank you so much for the opportunity. I just wanted to understand because of GST rate cuts what has been the market share gains for you in any other segments especially regarding OEMs. Have you seen an increase in market share especially for passenger car? Could you give us some perspective?

GST 2.0 has definitely brought in a lot of cheers to tyre segment , particularly for JK Tyre. Our share of business in the OEMs particularly in the CV is the highest. We are seeing a good pull from the vehicle manufacturers. Also, we are seeing good traction coming in from the replacement side as well. So, we see this segment to do well in the coming quarters. We are out of the monsoon as well and there is a lot of infrastructure push and rural demand coming in our way. In the passenger car as well, there has been a good traction in the entry level space where we are also participating. And we’ve seen our numbers in the PLT go up. There is a good demand coming in for the passenger as well in the replacement market. So, it augurs well in both the CV and passenger car. Further, we have seen a good mix in terms of higher rim sizes i.e. 16 inch and above. That is called premiumization. There also we have seen the mix improving in both OE and replacement. Plus, the farm segment is also performing really well . So there also we are likely to get good traction.

And is there any kind of quantification that you can give for the market share gain in these segments? Anything on passenger cars as well as CVs that you can provide right now?

So, we don't really quote any market share but definitely , our volumes have grown and we definitely have gained markets.

Just to give you an idea in the replacement market as Anshuman ji mentioned earlier that in TBR we have grown by 22% and in passenger car by 16% QoQ, I think this is more than the market growth rate. So, you can very well assume our market share has gone up.

And just one clarification, you mentioned about the capacity of JK Tornel. Could you just repeat the number please?

The installed capacities at JK Tornel stands at 59 lakh tyres.

All right. Thanks so much for answering the questions and all the best.

Thank you. The next question is from the line of Mitul Shah from Dam Capital. Please go ahead.

Thank you for the opportunity and congratulations for a really great sequential improvement on top line as well as margin. One clarification, if I do the OEM calculation, it is showing double digit decline, whereas this Q2 OEM production seems to be quite strong. So , anything I am missing out or is it because of the Tornel replacement increasing? So how one should read about this?

In number terms, if you see OEM we are talking about the overall increase across segments put together that has gone up because there is a significant increase in the non-truck, tractor and also in 2/3wheeler segments. If you compare the OEM numbers in terms of rupees crores, this is 2% increase approximately. This is almost flat, but volumes are up mainly on account of 2/3w and the tractor, there has been some good increase.

So overall OEM volumes are more or less flattish, we can say or revenue decline is something 11%?

When you compare the overall OE volumes, then it is not comparable. In some segments, it may have gone down. In some segments, it may have gone up. So that is why I am saying segment wise, we will have to see.

Revenue wise as per your calculations, is it a growth ?

It's coming 11% decline as per presentation.

With 2/3w segment, if you see, then OEM is almost like 43% increase YoY and if the volumes of 2/3w are not taken into account, then OEM volumes have increased by about 4% to 5%, since there is a significant increase in 2/3wheeler nos. this quarter on YoY basis.

Second question on the Tornel side, that there is a decent YoY growth. Even if we adjust for the currency, there is some growth on the revenue side. But margin improvement on a Y oY basis, it's a contraction. So, anything to do with the raw material or we having previous quarter's high value inventory or anything on the other expense side?

Mitul ji, there is a very small variation between the two quarters on Y oY basis. And that is because of the trading component difference. So last year, the trading component was lower and it is slightly more in this quarter. Although the margins are not very different, this is between 7% to 8% range only.

Last question on the India operation side. In FY24, we really gained market share and outperformed strongly to the peers. But since last five-six quarters, if I take the India operations revenue growth, it seems to be underperform ing versus industry as well as peer group. So, any market share loss one should think of or it is a product mix related challenge or anything else? And what is the strategy to rectify that going forward? This is the last question, sir.

No, there is nothing like that. We have already mentioned 15% volume growth on YoY basis in the domestic markets. Taking into account the exports as well , the total volume growth comes at 14% YoY. Further on QoQ basis, volumes are up by 11%. So, there is no question of any contraction in terms of the volumes.

If I take the revenue growth of India operations, which you have mentioned in all the results, that is coming much lower than the reporting for the India domestic business. So, is it like a commercial vehicle not doing great and we are stronger on the commercial vehicle side? So that is like a product mix impact or market share?

It is mainly because of the PCR since you are aware that in PCR, the selling prices are linked to the increase or decrease in the raw material prices. So that adjustment might have reduced the numbers on account of the value.

Understood, sir.

To add to this, the net revenues of India operations it is 10% up on YoY basis.

I don't think we will be able to compare. 2/3w prices might have gone up or may be some other segment’s prices. Also, product mix difference would be there. So, it is not straight. Hence, we are not actually making the comparison with other companies. And as of now, only one or two companies have declared the results for this quarter.

And adding to Sanjeev ji, I must mention here that CV OEMs have picked up in this Q2 only, wherein we are very strong. So, looking at previous or corresponding quarters, they were not as strong in terms of their production if compared with these Q2 numbers.

That is, I think, right analysis or understanding that because of the commercial vehicle, which might have slight impact on overall industry and that has affected. Great, sir. All the best !

Thank you.

Thank you. The next question is from the line of Maitri Shah from Sapphire Capital. Please go ahead.

Firstly, congratulations on Rs.4,026 crores top line. My question is on the revenue. So, what sort of guidance do you have for the second half of this year and also for the next financial year on the revenue?

So, as I was addressing the other investors that we see a good trajectory of demand going ahead, we are very confident that we will be able to achieve double digit growth on the revenues going forward.

That is great to hear. And secondly, you previously mentioned about the three capex projects under implementation. Could you please mention them again with the amount of capex that you are investing?

Total of Rs.1,400 crores worth of expansion. TBR, which is the truck & bus radial which we are expanding in Laksar, CIL with Rs.261 crores. All steel light truck radial, which we are expanding in Mysore, Rs.112 crores and Passenger line expansion, which is Rs.1,025 crores, in our Banmore plant. The start of production is from the end of Q3FY26 with ramping up by next financial year.

That is great. And this does not include the USD21 million for the Mexico capex that we are doing, correct?

Yes, that Mexico capex is separate.

Yes, that is right.

That’s it from my side. Thank you and all the best.

Thank you.

Thank you. The next question is from the line of Nandan Pradhan from Emkay Global.

Good evening, sir. Congratulations on a great set of numbers for this quarter. So just a small question from my side. So, in Q1, we expected the tyre industry to grow by about 7% or 8% for the full year. And we have already sustained our guidance of double-digit revenue growth for FY26. So, because of the recent GST cut and the festive surge that is going on, do you see any uptick in the guidance or would you sustain the same as the last quarter?

No, we would like to stick to our numbers in terms of the 10% growth guidance. Though we are seeing a good surge coming in and surely this momentum will carry on but we will stick to the numbers which we have already said.

Thank you so much. That answers my question.

Thank you. The next question is from the line of S.B. Bhaiya, as an individual investor.

Congratulations to you for a nice set of numbers. I have got only one question, with such a robust demand scenario which you have painted. How prepared you are from supply side till the time actually your new capacity comes in?

Our capacities are coming at different time lags across PCR and TBR. So, these expansions together will inch up our capacities by 12% to 13%. And that’s how we will be able to cater to our increased demand.

But as I understand your new capacities are coming in only in the last quarter of this financial year or by 1st Quarter of next financial year. So , till that time, do you think you will be able to meet the surge in demand?

Our new capacities for PCR, TBR and All steel light track radial tyres are coming in India in the 3rd Quarter. And in fact, the PCR capacity has already started in the month of October, but the ramp up will happen by March ’26. So, we are fully geared up to take up any surge in demand and we are ready to supply, we will not let any loss of sales on account of the capacity shortage. So, it will definitely get addressed. And as far as the Tornel is concerned, we will be ready by the 4th Quarter of this financial year. But in between when we start, we start with smaller capacities and then of course full ramp up happen over a period of 3 to 6 months depending upon the product.

Plus, capacity utilization is also increasing.

We are already operating at about 88% capacity and we are full ready to cater to any increased demand.

Great sir. So, you are not seeing capacity as a constraint to meet the demand?

Absolutely not.

Thank you, sir.

Thank you.

Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Thank you so much for joining this call and we are quite happy to have shared all the numbers and I hope all the questions have been fully addressed. Thank you very much for this and we look forward to the next quarter. Good day!

On behalf of Emkay Global Financial Services Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.