JK Tyre

INITIATING COVERAGE
Steady improvement all around
BUY

JK Tyre Industries Ltd (JKI) is the flagship company of JK Organisation and is the
country’s third largest and globally among top 25 tyre makers. The company's
18 September 2023 product portfolio includes automotive tyres for two-wheelers (2W), three-wheelers
BSE Sensex: 67839 (3W), passenger cars, utility vehicles (UVs), trucks & buses and off-the-highway
(OHT) vehicles. Though, we expect a slowdown in the M&HCV industry in FY25E,
Sector: Automobiles
leading to lower OEM sales for the tyre industry, we expect replacement demand
to revive 2HFY24 onwards after a muted performance over the past 1.5 years and
expect a rebound in the exports markets hereon. JKI has been steadily gaining
share during the last 2-3 years. We believe that overall market share
Stock data improvement of 50-60bps over the last three years for JKI.

CMP (Rs) 259 With new product launches, better quality and brand equity improvement, the
Mkt Cap (Rs bn/USD m) 63.7 /766
company has witnessed better pricing and margins over the past three years. Its
consolidated EBITDA margins improved from pre-Covid 10.7% in FY19 to current
Target Price (Rs) 315 12.3% in Q1FY24. We expect pricing to remain largely stable, while volume growth
would be supported by better replacement demand and rebound in the exports.
Change in TP (%) NA
Its improved brand image, better margins, debt reduction-led better balance
Potential from CMP (%) 21.6 sheet position and controlled capex are key triggers for valuation expansion.
Therefore, we initiate coverage on JKI with a BUY rating and a target price of
Earnings change (%) Rs315. We value the stock at 10x FY25E, implying a 21.6% upside.
FY24E NA
 Key Triggers:
FY25E NA
 We expect the company to record a single-digit volume CAGR of ~7% and ASP
Bloomberg code JKI IN growth of 1.5% over FY23-FY25E, factoring in recovery in replacement and
export revival, while OEM growth would taper down to a low single-digit growth.
1-yr high/low (Rs) 286/142
 JKI has gained some market shares in the PCR and 2W/3W segment over the
6-mth avg. daily volumes (m) 2.3 last 3 years on the back of capacity additions. We believe that its market share
gain to the tune of 20-30bps in PCR would aid volumes in FY24-25.
6-mth avg. daily traded value
 JKI’s recent focus on premium categories with new launches in the PV
(Rsm/USDm) 486.1/5.8 segment, new products in various categories and foray into high-value EV
Shares outstanding (m) 246.2 segment would raise average realisation.

Free float (%) 43.7  Successful turn-around of the subsidiary in India and margin expansion in
Mexico would improve the consolidated financials.
Promoter holding (%) 56.3
 Better margins, its steady deleveraging process, and improved brand equity,
are expected to expand valuation and lower the discounts to peers.
Price performance – relative & absolute
JK Tyre Sensex  .
600 Key valuation metrics
 to 31 Mar
Year FY21 FY22 FY23 FY24E FY25E
400 Net sales (Rs m) 90,431 1,18,529 1,46,449 1,58,813 1,74,328
Adj. net profit (Rs m) 2,950 2,077 3,025 6,605 8,166
200
Shares in issue (m) 246 246 246 246 260
Adj. EPS (Rs) 12.0 8.4 12.3 26.8 31.5
0
Sep-20 Jun-21 Mar-22 Dec-22 Sep-23
% change 34.6 (29.6) 45.6 118.3 17.3
(%) 3-mth 6-mth 1-yr PE (x) 9.1 13.9 12.6 9.6 8.2
JKI IN 36.1 73.6 38.4 Price/ Book (x) 1.0 1.0 1.2 1.6 1.4
EV/ EBITDA (x) 5.6 7.4 6.7 5.4 4.6
BSE Sensex 7.8 17.9 13.2
RoE (%) 11.3 7.3 9.7 18.4 18.5
RoCE (%) 11.9 8.5 10.5 17.3 19.0
Source: Company, DAM Capital Research

Mitul Shah
mitul@damcapital.in
42022643

For Private Circulation only “Important disclosures appear at the back of this report”
 JK Tyre

 Outlook and Valuation

We expect automobile production to record an 8% volume CAGR over FY23-FY25E, therefore we expect a largely
similar growth for the OEM tyre segment. We expect the replacement segment to record a 6.6% CAGR for the
industry, and export is likely to rebound strongly 2HFY24 onwards with a 16% CAGR. We believe that JKI would gain
some market shares in the PV and 2W segment, while maintaining shares in the CV segment. We expect a similar
single-digit volume growth for its Mexico operations. We expect overall volume CAGR of 7% and ASP CAGR of 1.5% for
JKI over FY23-FY25E. We estimate rev/EBITDA/earnings CAGR of 9%/29%/64% over FY23-FY25E. Its brand equity
improvement has improved its pricing power over the past 3-4 years, and we expect its EBITDA margin expansion of
~350bps to 12.4% (in line with current 12.3%) over FY23-FY25E.

We expect sizable net debt to reduction over the next two years due to lower capex
balance sheet improvement, requirements and healthy operational cash flow. Therefore, balance sheet
along with margin expansion, improvement, along with margin expansion, leads to valuation expansion and lower
leads to valuation expansion and discount to peers. We expect its valuation discount to peers (CEAT and Apollo Tyre)
lower discount to peers. We to fall to 20-25% from the historical 40%. Therefore, we assign 10x P/E to JKI on
expect its valuation discount to
FY25E earnings. In view of the strong products basket, healthy pricing, likely revival
peers (CEAT and Apollo Tyre) to
in replacement demand, better export potential, margin expansion in India as well
fall to 20-25% from the
as Mexico operations and valuation comfort at 8.2x FY25E, we have a positive view
historical 40%. Therefore, we
on JKI. Therefore, we initiate coverage on JKI with a BUY rating and a target price of
assign 10x P/E to JKI on FY25E
Rs315, valuing the stock at 10x FY25E EPS.
earnings....

Exhibit 1: P/E Valuation trend Exhibit 2: EV/EBITDA Valuation trend

1yr Fwd PE +1 SD Avg -1 SD 1yr Fwd EV-E Avg +1 SD -1 SD

25 12

20
9
15
6
10
3
5

0 0
Apr-11

Apr-12

Apr-13

Apr-14

Apr-15

Apr-16

Apr-17

Apr-18

Apr-19

Apr-20

Apr-21

Apr-22

Apr-23

Apr-11

Apr-12

Apr-13

Apr-14

Apr-15

Apr-16

Apr-17

Apr-18

Apr-19

Apr-20

Apr-21

Apr-22

Apr-23
Source: Bloomberg, DAM Capital Research Source: Bloomberg, DAM Capital Research

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 JK Tyre

Investment Rationale
 Stable Volume and Gradual Market Share Gain
We expect automobile production to record an 8% volume CAGR over FY23-FY25E, due to high base in the past two
years and a slower economic expansion. We expect similar volume growth for JKI in the OEM segment. The company
has gained market share in the PCR segment over the last 12-18 months. It is expected that market share level in
PCR will improve with better product positioning and further availability of capacity through expansions. JKI’s new
product launches and capacity expansion in PCR and TBR would help market share gain in the replacement segment.
However, export business still remains under pressure, which we expect to revive strongly H2FY24 onwards. Thus, we
expect stable volumes in the domestic OEM segment, strong revival in exports and marginal market share gain in the
replacement segment. Overall volume and revenues are expected to record 8% and 9% CAGR over FY23-FY25E. We
expect market share gain of 30-50 bps in the PCR segment on account of new capacity addition. Therefore, we
expect the overall volume CAGR of 7% over FY23-FY25E.

Exhibit 3: Segmental Revenue Growth

Growth (%)
60.0%
PCR Growth YoY FES and OTR Growth YoY

40.0%

20.0%

0.0%

-20.0%
FY20 FY21 FY22 FY23 FY24E FY25E
Source: Company, DAM Capital Research

 Premiumisation and New Product Launches to Improve Pricing and Expand Margins
JKI has recently increased focus on new product launches with better quality, performance and premiumisation.
Contribution of high-margin premium products is steadily rising for both the operations. Brand equity of the company
has also improved in the last 2-3 years, supporting the pricing power. We believe that the new products, better quality
and network expansion would support market share gain in the replacement segment, going ahead. Moreover, its
improved exports traction from India as well as Mexico to major markets would provide a decent platform for the next
leg of growth. We expect the positive OEM trend to continue with ease owing to the supply of components and a
strong order book for PVs. The company’s PCR capacity expansion with a capex of Rs5.3bn is on track. Presently,
premiumisation in the PCR segment accounts for 25% of the overall PCR sales of JKI. The company aims to improve
this to 30% by FY24. In TBR, this stands at 85-90%, which was at 70% 3-4 years ago.

It has a state-of-the-art R&D centre in Mysore, Karnataka with more than 200 R&D and technology scientists and
engineers working in the field of advanced materials, alternate materials, nanotechnology, process and product
simulations, predictive technology, advanced tyre mechanics, etc.

JKI is also a pioneer in launching innovative products such as smart tyres, puncture guard tyres, ultra-high-
performance tyres and other premium products to differentiate itself in the marketplace and improve its market
share. We believe that this premiumisation trend, coupled with its foray into high-value EV segment, would drive
average realisation and margins of the company going forward.

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 JK Tyre

Exhibit 4: Recent Innovative Product Launches

Source: Company, DAM Capital Research

Exhibit 5: Green Tyre

Source: Company, DAM Capital Research

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 JK Tyre

 EV Foray and Sustainable Tyres Augur Well

JKI has a large bouquet of EV tyres and is presently supplying EV tyres to various electric vehicle OEMs, such as JBM
for e-buses, Ashok Leyland, TATA Motors, Olectra and various STUs (including Switch Mobility) and various 2/3-
wheeler OEMs. The first electric bus launched by DTC was from JK Tyre. Also, 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. It has also
developed all-new sustainable tyre ‘UX Green’ in the PCR segment using 80% sustainable materials, which is under
testing phase. JKI has accelerated digital transformation to strengthen internal systems and processes across
functions, i.e., marketing & sales, procurement, manufacturing, supply chain, etc. The company has completely
digitalised the sales and service function for better monitoring of sales process and the entire settlement is
happening through an app. All these factors would support the company in the next decade of growth through
innovative products and processes.

Exhibit 6: EV Tyres

Source: Company, DAM Capital Research

Exhibit 7: New Technology Product Portfolio

Source: Company, DAM Capital Research

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 JK Tyre

 Turnaround of Subsidiaries Improves Overall Profitability and Return Ratios

JKI has a successful track record of turning around businesses. It had acquired Vikrant Tyres from the Government of
Karnataka in 1998 and has successfully expanded capacities and revenues multi-fold since then. In 2008, it
acquired Tornel in Mexico. In 2016, Cavendish Industries Ltd (CIL) was acquired from Birla tyres. CIL Operations have
improved significantly since acquisition. Post-acquisition, CIL has ramped up production by > 5x.

Exhibit 8: Subsidiaries Turning-around

Cavandish Financials Tornel Financials

EBITDA PAT EBITDA PAT
5000 2500

4000 2000

3000 1500

2000 1000

1000 500
0 0
-1000 -500
FY19 FY20 FY21 FY22 FY23 Q1FY24 FY19 FY20 FY21 FY22 FY23 Q1FY24
Source: Company, DAM Capital Research

JKI’s Mexico subsidiary JK Tornel’s revenues have grown significantly by 135% in last two years, with multi-fold
growth in the bottom line. As per management’s commentary in the recent earnings call, economic outlook in Mexico
is improving with higher-than-expected GDP, moderating inflation and low unemployment rate, supporting private
consumption and increased investment from companies relocating to the LATAM countries. Moreover, dealer stock
has also reduced significantly, hence dealer re-stocking would boost volumes ahead. The company has developed
new products for Mahindra Tractors USA, Polaris USA and has added new customers in USA, Brazil and Peru recently.

 Margin Expansion and Debt Reduction Lowers Valuation Discounts and Re-rating Continues…
JKI’s net debt has reduced by ~25% since FY19 to Rs42.65bn as on 30 June 2023. The long-term borrowings are
expected to reduce further by 25% in next three years until FY26 (after considering term loan to be raised for the
ongoing PCR and TBR projects). The company has a clear focus to deleverage, with a target to bring down net D/E <
1x and net debt/EBITDA < 2x. Net debt to equity stood at 1.16x and net debt to EBIDTA stood at 2.44x as on 30 June
2023 ─ a significant improvement in last one year. JK Tornel’s net debt (primarily working capital) stood at Rs1.9bn
as on 30 June 2023 ─ there has been a sizable reduction since FY19 level of Rs5bn.

Therefore, we believe that margin expansion of 350bps over FY23-FY25E, debt reduction and comfortable D/E ratio,
in addition to improving return ratios, would lower its valuation discount to peers from 40% to 20%. Therefore, we
assign P/E valuation multiple of 10x to FY25E earnings.

Exhibit 9: Steady Debt Reduction and Improving Metrics

Source: Company, DAM Capital Research

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 JK Tyre

 Key Risks
 Prolonged economic slowdown
 Higher competitive intensity
 Any major change in government regulation
 Higher commodity prices or Sharp increase in crude prices
 Adverse currency movement

Exhibit 10: Quarterly result analysis (Consolidated)

YE March (Rs. mn) 1QFY24 1QFY23 YoY (%) 4QFY23 QoQ (%)
Total Revenue 37,181 36,430 2.1 36,325 2.4
Less:
Net Raw Material consumed 23,332 25,650 (9.0) 23,826 (2.1)
Other Expenses 5,918 5,048 17.2 5,461 8.4
Personnel 3,359 2,883 16.5 3,276 2.5
Total Expenditure 32,610 33,582 (2.9) 32,563 0.1
EBIDTA 4,571 2,849 60.5 3,762 21.5
Less: Depreciation 1,058 1,007 5.1 1,056 0.2
EBIT 3,513 1,842 90.7 2,706 29.8
Less: Interest 1,222 991 23.3 1,254 (2.5)
Add: Other income 83 66 27.2 125 (33.1)
Extraordinary Expense (net) 44 -345 NA 102 (57.4)
Profit Before Tax 2,418 571 323.3 1,679 44.0
Less: Total Tax 824 232 254.6 553 48.9
Profit After Tax before Minority Interest 1,594 339 370.5 1,125 41.6
Minority Interest 47 -21 NA 32 48.4
Profit from Associates -8 13 NA -10 NA
Profit After Tax 1,539 372 313.7 1,084 42.0
Adj. PAT 1,511 596 153.3 1,017 48.5
Reported EPS (Rs.) 6.25 1.51 313.7 4.40 42.0
Adj. EPS (Rs.) 6.13 2.42 153.3 4.13 48.5
Change Change
Margin Analysis (%)
in bps in bps
EBIDTA Margin 12.3 7.8 447 10.4 194
Adj. NPM 4.1 1.6 243 2.8 126
Effective Tax Rate 34.1 40.7 -661 33.0 112
Cost Analysis (%)
RM/Net Sales 62.8 70.4 -766 65.6 -284
Other Expenses 15.9 13.9 206 15.0 88
Personnel/Net Sales 9.0 7.9 112 9.0 2
Source: Company, DAM Capital Research

 Q1FY24 Result Highlights (Consolidated)

 Consolidated revenues grew 2.1% YoY (+2.4% QoQ) to Rs37.2bn on account of regular price hike and largely flat
volumes.
 Its EBIT margins for India operations expanded by 530bps YoY and 170bps QoQ to 10%, while for Mexico
operations it contracted by 75bps YoY (+210bps QoQ) to 6.3%.
 EBITDA margins expanded due to lower commodity cost – RM/sales fell 765bps YoY/285bps QoQ.
 EBITDA grew strongly by 61% YoY/22% QoQ to Rs4.5bn, way ahead of consensus estimates, despite increasing
other expenses and personnel costs but significant reductions in RM costs.
 PAT improved by 3x YoY and 1.2x QoQ to Rs1.5bn.

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 JK Tyre

Exhibit 11: Quarterly result analysis (Standalone)

YE March (Rs. mn) 1QFY24 1QFY23 YoY (%) 4QFY23 QoQ (%)
Net Sales 24,558 23,336 5.2 23,928 2.6
Less: -
Net Raw Material consumed 16,087 16,655 (3.4) 16,196 (0.7)
Other Expenses 3,790 3,317 14.3 3,594 5.4
Personnel 1,923 1,653 16.3 1,937 (0.7)
Total Expenditure 21,800 21,625 0.8 21,727 0.3
EBIDTA 2,758 1,711 61.3 2,201 25.3
Less: Depreciation 618 611 1.2 627 (1.5)
EBIT 2,141 1,100 94.6 1,574 36.0
Less: Interest 690 543 27.1 729 (5.4)
Add: Other income 70 56 23.9 111 (37.3)
Extraordinary Expense (net) 5 -219 NA 26 (82.5)
Profit Before Tax 1,525 394 286.7 982 55.3
Less: Total Tax 523 128 310.1 309 69.5
Profit After Tax 1,002 267 275.5 673 48.8
Adj. PAT 998 415 140.8 655 52.4
Reported EPS (Rs.) 4.07 1.08 275.5 2.73 48.8
Adj. EPS (Rs.) 4.06 1.68 140.8 2.66 52.4
Change Change
Margin Analysis (%)
in bps in bps
EBIDTA Margin 11.2 7.3 390 9.2 203
Adj. NPM 4.1 1.8 229 2.7 133
Effective Tax Rate 34.3 32.4 196 31.4 287
Cost Analysis
RM/Net Sales 65.5 71.4 -586 67.7 -218
Other Expenses/Net Sales 15.4 14.2 122 15.0 41
Personnel/Net Sales 7.8 7.1 74 8.1 -26
Source: Company, DAM Capital Research

 Analyst Call Highlights

 Demand Environment: During the quarter, overall volumes grew 3% QoQ, with replacement growth of 8% QoQ.
OEMs witnessed an 8% QoQ decline due to seasonality for high value TBR, on account of pre-buying effort by CV
OEMs prior to transition to OB D2 emission norms. The PV demand continues to remain steady in OEM and
replacement. The farm segment’s demand is showing good signs of recovery due to increasing farm income with
good monsoon, coupled with the government incentive scheme.
 Exports Outlook: Export revenue stood at Rs5.87bn, up 23%QoQ, led by higher volume. The company’s export is
improving sequentially with a gradual pick up in few markets, while it is expected to rebound strongly in the
upcoming quarters. It expects a double-digit growth in exports in FY24E.
 EBITDA Margins: Its RM basket fell 1% QoQ, helping margin expansion sequentially. Its RM cost would remain flat
QoQ in 2QFY24 and is likely to remain stable throughout FY24, according to the management.
 Price Hike: JKI has been taking price hike regularly since the past two years in every quarter. However, this time,
no major price hike has been taken, however, in few export geographies price rationalisation is being carried out
to achieve scale.
 Capex and Debt: FY24 capex would be Rs8bn. The company has an overall project capex of Rs11bn over two
years, in addition to maintenance capex of Rs1.5-2bn/annum. Of the project capex worth Rs11bn, the majority
would be spent in FY24. Its debt has declined gradually and fell by Rs0.5bn during the quarter. Net debt stood at
Rs42.65bn as of Q1FY24 and net debt to equity stood at 1.2x. JKI has a target to reduce the long-term debt by 25% after
taking in new debt.

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 JK Tyre

 Other Highlights:
 In Q1FY24, capacity utilisation was at 85%.
 The company won new orders from KIA and Hyundai.
 Cavendish turned net positive.
 The improvement in margins was a result of improvement in the subsidiary, operational performance and
commodity benefits.
 The company plans to penetrate deeper into the domestic market and cover a wide range of distribution.
 The company faced headwinds in the American continent on account of lower freight rates, influx of tyres from
Asian countries and appreciation of the Mexican pesos.
 The economic outlook in Mexico is improving due to higher-than-expected GDP, moderating inflation, low
unemployment rate supporting private consumption and increase in investment from companies relocating to the
LATAM countries.
 JK Tornel’s new potential customers are Mahindra Tractors USA, Polaris USA and Speed Max Brazil.
 Cavendish Industries’ financial performance for Q1FY24: Revenue: Rs9.63bn, EBITDA: Rs1.21bn, EBITDA margin:
12.5% and PAT: Rs370mn.
 The company is partnering with all the EV-Bus manufactures including Ashok Leyland, TATA Motors, JBM and
Olectra for the EV tyres.
 North America is on the recovery path and is expected to recover by H2FY24.
 JKI expects commercial vehicles to record nearly a double-digit growth and for passenger vehicles, it expects it to
be in a high single-digit.
 The company has consumed MAT credit and will move into the new regime that will reduce its overall tax costs to
~30%.

Exhibit 12: Assumptions

Y/E March (Rs.mn) FY21 FY22 FY23 FY24E FY25E
Standalone Revenues
Truck & Bus 36,928 49,709 59,386 56,677 60,645
Growth Y-o-Y -3.5% 34.6% 19.5% -4.6% 7.0%
PCR 15,125 16,893 22,133 30,641 33,705
Growth Y-o-Y 2.8% 11.7% 31.0% 38.4% 10.0%
FES OTR & Others 7,637.0 9,915.2 10,448.9 13,812.8 15,470.4
Growth Y-o-Y 15.0% 29.8% 5.4% 32.2% 12.0%
2W/3W 1,655 3,804 4,211 4,785 5,263
Growth Y-o-Y 40.8% 129.8% 10.7% 13.6% 10.0%
Total Standalone Revenue 61,345 80,321 96,179 1,05,916 1,15,084
Growth Y-o-Y 0.7% 30.9% 19.7% 10.1% 8.7%
Subs Revenues 29,677 39,509 50,270 52,897 59,244
Growth Y-o-Y 12.8% 33.1% 27.2% 5.2% 12.0%
Consolidated Revenues 91,022 1,19,830 1,46,449 1,58,813 1,74,328
Growth Y-o-Y 4.4% 31.6% 22.2% 8.4% 9.8%
Source: Source: Company, DAM Capital Research

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 JK Tyre

Exhibit 13: Standalone Key Financials

Y/E March (Rs.mn) FY21 FY22 FY23 FY24E FY25E
Net Sales (Standalone) 61,345 80,320 96,179 1,05,916 1,15,084
YoY growth (%) 0.7 30.9 19.7 10.1 8.7
EBIDTA 8,510 7,005 7,748 11,589 13,213
YoY growth (%) 30.9 -17.7 10.6 49.6 14.0
EBITDA Margin 13.9 8.7 8.1 10.9 11.5
Adj. Net Profit 2,427 1,803 2,084 4,569 6,383
YoY growth (%) -2.1 -25.7 15.6 119.3 39.7
Net Profit Margin 4.0 2.2 2.2 4.3 5.5
EPS(Rs.) 9.9 7.3 8.4 18.6 24.6
YoY growth (%) -2.1 -25.8 15.4 119.7 32.5
Source: Company, DAM Capital Research

Company Background:
JK Tyre Industries Ltd (JKI) is the flagship company of JK Organisation and is the country’s third largest and
globally among the top 25 tyre makers. The company's product portfolio includes automotive tyres for two-
wheelers (2W), three-wheelers (3W), passenger cars, utility vehicles (UVs), trucks & buses and off-the-highway (OHT)
vehicles. Over the years, it has gained ground in the exports market with new products. It is engaged in the
manufacturing of tyres, tubes and flaps with operation spread across seven manufacturing units in India. The
company has a stronger presence across markets, i.e., OEM (23%), replacement (60%) and exports (17%). JKI is
present in 105 countries with over 180 global distributors. The company has 12 globally benchmarked ‘sustainable’
manufacturing facilities ─ 9 in India and 3 in Mexico – that collectively produce ~35 mn tyres annually. The company
also has a strong network of over 4000 dealers and 500+ dedicated brand shops called Steel Wheels and Xpress
Wheels.

Exhibit 14: Company at a glance – Plant locations and global presence

Source: Company, DAM Capital Research

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 JK Tyre

Exhibit 15: Revenue break-up Product wise

FY22 Others FY23

Others
14%
14%
2/3W 2/3W
4% 4%

CV CV
56% 54%
PV PV
26% 28%

Source: Company, DAM Capital Research

Exhibit 16: Revenue break-up (Market wise)

FY22 FY23
Exports
20% 17%

Replaceme
nt OEM Replacemen
54% 23% t
OEM
26% 60%

Source: Company, DAM Capital Research

Exhibit 17: Product details across segments

Source: Company, DAM Capital Research

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Exhibit 18: Strategy to Expand Market Presence and Market Share

Source: Company, DAM Capital Research

Exhibit 19: Revenue break-up – 2W/4W

Source: Company, DAM Capital Research

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Exhibit 20: Wider Network and Connect

Source: Company, DAM Capital Research

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 Key Financials - Story in Charts

Exhibit 21: Revenue trend Exhibit 22: EBITDA and EBITDA margin trend

Revenue (Rs mn) Growth (%, RHS) EBITDA (Rs mn) EBITDA margin (%, RHS)
200,000 45.0% 24,000 20.0%

150,000 30.0% 18,000 15.0%

100,000 15.0% 12,000 10.0%

50,000 0.0% 6,000 5.0%

0 -15.0% 0 0.0%

FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24E
FY25E
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24E
FY25E
Source: Company, DAM Capital Research Source: Company, DAM Capital Research

Exhibit 23: PAT trend Exhibit 24: EBITDA and ROCE trend
Net Profit (Rs mn) NPM (%, RHS) EBITDA (Rs mn) ROCE (%, RHS)
10,000 8.0% 25,000 15.0%
8,000 20,000 12.0%
6.0%
6,000 15,000 9.0%
4.0%
4,000 10,000 6.0%
2.0% 5,000 3.0%
2,000

0 0.0% 0 0.0%

FY23
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22

FY24E
FY25E
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24E
FY25E

Source: Company, DAM Capital Research Source: Company, DAM Capital Research

Exhibit 25: PAT and ROE trend Exhibit 26: EPS Trend

PAT (Rs mn) ROE (%, RHS) EPS (Rs) Growth (%, RHS)
10,000 35.0% 40.0 2400%
8,000 28.0% 32.0 1800%
6,000 21.0% 24.0 1200%
4,000 14.0% 16.0 600%
2,000 7.0% 8.0 0%
0 0.0% 0.0 -600%
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24E
FY25E

FY21
FY15
FY16
FY17
FY18
FY19
FY20

FY22
FY23
FY24E
FY25E

Source: Company, DAM Capital Research Source: Company, DAM Capital Research

 Glossary:
EV: Electric Vehicle
CV: Commercial Vehicle
HCV: Heavy Commercial Vehicle
LCV: Light Commercial Vehicle
PV: Passenger Vehicle
ICE: Internal Combustion Engine
BEV: Battery Electric Vehicle
2W: Two Wheeler
4W: Four Wheeler
PCR: Passenger Car Radial
TBR: Truck Bus Radial
TBB: Truck Bus Bias
STU: State Transports Undertaking

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Income statement Key ratios

Year to 31 Mar (Rs m) FY21 FY22 FY23 FY24E FY25E Year to 31 Mar FY21 FY22 FY23 FY24E FY25E
Net sales 90,431 1,18,529 1,46,449 1,58,813 1,74,328 EBITDA margin (%) 14.4 9.1 8.9 12.2 12.4
% growth 5.1 31.1 23.6 8.4 9.8 EBIT margin (%) 10.2 5.8 6.1 9.5 9.7
Operating expenses 77,959 1,09,097 1,33,471 1,39,428 1,52,721 PAT margin (%) 3.3 1.8 2.1 4.2 4.7
EBITDA 13,063 10,733 12,978 19,384 21,607 RoE (%) 11.3 7.3 9.7 18.4 18.5
% change 32.6 (17.8) 20.9 49.4 11.5 RoCE (%) 11.9 8.5 10.5 17.3 19.0
Other income 431 366 365 352 484 Gearing (x) 1.6 1.7 1.5 1.0 0.6
Net interest cost 4,659 4,191 4,545 4,955 4,633 Net debt/ EBITDA (x) 3.4 4.6 3.7 2.0 1.4
Depreciation 3,867 3,854 4,071 4,376 4,668 FCF yield (%) 22.1 0.8 13.0 20.9 17.5
Pre-tax profit 4,969 3,055 4,728 10,406 12,790 Dividend yield (%) 0.3 0.8 0.8 0.8 0.8
Deferred tax 0 0 0 0 0
Current tax 2,009 1,087 1,465 3,635 4,413
Profit after tax 3,041 1,998 3,013 6,801 8,400
Valuations
Year to 31 Mar FY21 FY22 FY23 FY24E FY25E
Preference dividend 0 0 0 0 0
Minorities (116) 88 (6) (189) (223) Reported EPS (Rs) 13.0 8.5 10.7 26.9 31.5
Adjusted net profit 2,950 2,077 3,025 6,605 8,166 Adj. EPS (Rs) 12.0 8.4 12.3 26.8 31.5
Non-recurring items 244 24 (400) 28 0 PE (x) 9.1 13.9 12.6 9.6 8.2
Reported net profit 3,194 2,101 2,625 6,633 8,166 Price/ Book (x) 1.0 1.0 1.2 1.6 1.4
% change 111.9 (34.2) 24.9 152.7 23.1 EV/ Net sales (x) 0.8 0.7 0.6 0.7 0.6
EV/ EBITDA (x) 5.6 7.4 6.7 5.4 4.6
EV/ CE (x) 0.9 0.9 1.0 1.2 1.1
Balance sheet
As on 31 Mar (Rs m) FY21 FY22 FY23 FY24E FY25E
Paid-up capital 493 493 493 493 519
Shareholding pattern
Preference capital 0 0 0 0 0
Reserves & surplus 26,235 27,991 31,204 37,344 47,364
Shareholders' equity 27,790 29,475 32,694 39,023 49,292
Total current liabilities 31,829 37,799 37,386 48,884 54,846
Total debt 46,565 51,152 50,101 45,101 38,701
Deferred tax liabilities 3,221 3,182 3,211 3,211 3,211
Other non-current
0 0 0 0 0
liabilities
Total liabilities 81,614 92,133 90,697 97,195 96,757
Total equity & liabilities 1,09,404 1,21,607 1,23,390 1,36,218 1,46,049
Net fixed assets 65,231 65,239 66,522 68,646 68,478
Investments 1,470 1,328 1,328 1,354 1,382
Cash 1,738 1,757 2,658 5,488 8,064
Other current assets 36,421 47,589 47,060 54,906 62,304
Deferred tax assets 0 0 0 0 0
Other non-current
4,545 5,695 5,823 5,823 5,823
assets
Net working capital 6,330 11,547 12,332 11,511 15,522
Total assets 1,09,404 1,21,607 1,23,390 1,36,218 1,46,049
As of Jun-23
Cash flow
Year to 31 Mar (Rs m) FY21 FY22 FY23 FY24E FY25E
Pre-tax profit 4,969 3,055 4,728 10,406 12,790
Depreciation 3,867 3,854 4,071 4,376 4,668
Chg in Working capital 16,874 (6,503) 450 3,651 (1,435)
Total tax paid (889) (698) (1,368) (3,635) (4,413)
Net Interest 4,659 4,191 4,545 4,955 4,633
Others (13,869) (473) 432 0 0
Operating cash flow 15,984 3,461 12,242 19,796 16,243
Capital expenditure (1,931) (2,920) (3,985) (6,500) (4,500)
Free cash flow (a+b) 14,053 540 8,257 13,296 11,743
Chg in investments (2) 250 0 (27) (27)
Debt raised/(repaid) (1,974) 13,900 1,682 (5,000) (6,400)
Net interest (4,710) (4,254) (4,435) (4,955) (4,633)
Capital raised/(repaid) 0 0 0 0 2,400
Dividend (incl. tax) (172) (493) (369) (493) (519)
Other items 0 0 0 0 0
Net chg in cash 373 19 902 2,830 2,575

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Disclaimer
This document has been prepared by DAM Capital Advisors Limited [the company/DAM Capital]. DAM Capital is a full-service, integrated investment
banking, and institutional broking company. DAM Capital is registered with SEBI as Research Analyst having SEBI Registration number as INH000000131.

Disclaimer/Disclosures:
The following disclosures are being made in Compliance with the SEBI Research Analyst Regulations 2014 (hereinafter referred to as Regulations)
1. DAM Capital the Research Entity (RE) is also engaged in the business of Investment Banking and Stock Broking and is registered with SEBI for the same.
2. There are no material disciplinary actions taken against DAM Capital as on the date of publication of this report.
3. DAM Capital and associates may from time to time solicit from or perform investment banking or other services for companies covered in its research
report. Hence, the recipient of this report shall be aware that DAM Capital may have a conflict of interest that may affect the objectivity of this report.
Investors should not consider this report as the only factor in making their investment decision.
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entities covered in this report. Please read this in conjunction with other disclosures herein.
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exceeding 1% or more of the securities of the company (ies) covered in this report as of the end of the month immediately preceding the date of
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research report in the past 12 months period ending on the last day of the month preceding the date of publication of this research report.
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is made as to the accuracy, completeness or fairness of the information and opinions contained in this document.
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viii. The information contained herein is from publicly available data or made by thorough analysis done by DAM Capital team. The views expressed are
those of analyst and the Company may or may not subscribe to all the views expressed therein.
ix. While DAM Capital would endeavour to update the information herein on reasonable basis, the opinions and information in this report are subject to
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however arising, from the use of this document.

Copyright of this document vests exclusively with DAM Capital Advisors Limited
Contd…

16 | DAM CAPITAL 18 September 2023

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Disclaimer
Foreign currency-denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or the price of, or income derived
from, the investment. In addition, investors in securities, the values of which are influenced by foreign currencies effectively assume currency risk.
Associates of DAM Capital may have issued other reports that are inconsistent with and reach different conclusions from, the information presented in this report.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country
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such applicable restrictions.
Reports based on technical analysis centres on studying charts of a stock's price movement and trading volume, as opposed to focusing on a company's
fundamentals and, as such, may not match with a report on a company's fundamentals.
Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. DAM Capital will not treat recipients as
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The analyst certifies that all of the views expressed in this research report accurately reflect his/her personal views about any and all of the subject issuer(s)
or securities. The analyst certifies that no part of his / her compensation was, is, or will be directly or indirectly related to the specific recommendation(s)
and/or views expressed in this report.

Research Disclaimer - Notice to US Investors

This report was prepared, approved, published and distributed by DAM Capital Advisors Limited, a company located outside of the United States (a “non-US
Company”).This report is distributed in the US by DAM Capital (Parent of DAM Capital (USA) Inc.) only to major U.S institutional investors (as defined in Rule
15a-6 under the U.S Securities Exchange Act of 1934 (the “Exchange Act”)) pursuant to the exemption 15a-(2) of the Rule and any transaction effected by a
U.S customer in the securities described in this report must be effected through DAM Capital USA as defined in the Rule.
Neither the report nor any analyst who prepared or approved the report is subject to U.S legal requirements or Financial Industry Regulatory Authority, Inc.
(“FINRA”) or other regulatory requirements pertaining to research reports or research analysts. The non-US Company is neither registered as a broker-dealer
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analyst(s) responsible for this research report. The research analysts preparing this report are residents outside the United States and are not associated
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with a subject company, public appearances and trading securities held by a research analyst account.
It is distributed in the United States of America by DAM Capital under 15a-6(a)(2) and elsewhere in the world by DAM Capital or any authorised associate of
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ANALYST DISCLOSURES
1. The analyst(s) declares that neither he/she or his/her relatives have a Beneficial or Actual ownership of > 1% of equity of Subject Company/ companies;
2. The analyst(s) declares that he/she has no material conflict of interest with the Subject Company/ companies of this report;
3. The research analyst (or analysts) certifies that the views expressed in the research report accurately reflect such research analyst's personal views about
the subject securities and issuers; and
4. The research analyst (or analysts) certifies that no part of his or her compensation was, is, or will be directly or indirectly related to the specific
recommendations or views contained in the research report.
5. The research analyst declares that he has not served as an officer, director or employee of the subject company.

Rating System

Investment Ratings Expected returns (over 12-month)

Buy > =10%
Sell < -5%
Neutral <-5% to 10%

Copyright in this document vests exclusively with DAM Capital Advisors Limited.
SEBI Registration Nos. of DAM Capital Advisors Limited
Research Analyst INH 000000 131
Stock Broker
NSE Capital Markets
NSE Futures & Options
INZ000207137
BSE Capital Markets
BSE Futures & Options
Merchant Banker INM000011336

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