Analyst Forecasts Potential Doubling of JK Tyre Stock Price in 3 Years: Investment Insights

JK Tyre, a prominent player in the tire industry, is on the radar of investors as a domestic brokerage, Emkay Global, initiates coverage with a 'buy' recommendation. They have set a target price of Rs 415, indicating a 55% upside from the recent closing price of approximately Rs 266.8 on October 9. Emkay Global is optimistic that JK Tyre's stock price could double within the next three years.

Image Source -www.indiamart.com

JK Tyre, a prominent player in the tire industry, is on the radar of investors as a domestic brokerage, Emkay Global, initiates coverage with a 'buy' recommendation. They have set a target price of Rs 415, indicating a 55% upside from the recent closing price of approximately Rs 266.8 on October 9. Emkay Global is optimistic that JK Tyre's stock price could double within the next three years.

In response to this announcement, JK Tyre's stock witnessed a 0.69% uptick, closing at Rs 269 per share on the NSE on October 10. Over the past month, the stock has seen a solid 4% gain, and on a year-to-date (YTD) basis, it has surged by an impressive 45%.

Analyzing the technical indicators, the 14-day relative strength index (RSI) for JK Tyre's stock stands at 47.4, indicating it is currently neither overbought nor oversold. With a beta of 1.0, the stock shows average volatility over the course of a year.

Notably, JK Tyre's shares are trading above the 20-day, 50-day, 100-day, 150-day, and 200-day moving averages, but they are lower than the 5-day and 10-day moving averages.

Emkay Global highlights that JK Tyre has outperformed its peers for the past 12 quarters, marking a significant transformation in its competitive position. This transformation is attributed to higher investments in research and development, marketing, and distribution expansion. Additionally, the company's focus on operating efficiency and financial discipline, particularly in calibrated capital expenditure, has played a pivotal role.

Also Read: Lissun's Ambitious Mission: Breaking Barriers To Mental Health Support

Key structural improvements within the tire industry, such as reduced imports, enhanced export competitiveness, premiumization, and controlled capital expenditures, have contributed to JK Tyre's impressive performance.

Emkay Global envisions stable-to-positive medium-term growth, with a projected 7% compound annual growth rate (CAGR) in volume until FY26E. This growth is expected to outpace capacity additions, in line with the industry's approach to strategic capital expenditure.

The brokerage has forecasted an 8% revenue CAGR and a substantial 58% growth in profit after tax (PAT) for FY23-26E, which should result in significant deleveraging. This will improve JK Tyre's return on capital employed (ROCE) from 11% in FY23 to 21% in FY26E.

Emkay Global also anticipates that JK Tyre's valuation multiples will align with those of its industry peers, driven by a strong 58% compound annual growth in earnings per share (EPS) and a focus on environmental, social, and governance (ESG) and sustainability initiatives.

However, the brokerage has identified key risks, including a sharp demand slowdown, a sudden spike in raw material costs, and unfavorable outcomes in competition commission rulings.