JK Tyre hits a new low

JK Tyre is among the top five losers on the BSE, going down from yesterday’s close of Rs.71.35, to hit a new 52-week low at Rs.60.

The market is very unhappy with the company’s performance for Q1FY20 wherein its net profit for the quarter slumped 74% (YoY) at a meagre Rs.16 crore v/s Rs.64 crore in previous Q1. The slowdown in the auto sector obviously has hit the earnings as the overall operational performance was down.

Revenue from operations rose 6% at Rs.2575 crore but EBITDA margins tell the story – it was down 400 bps from 13.3% to 9.3%.

The company said, “The Quarter ending June 2019 witnessed considerable de-growth in Auto sales. Most of the OEMs have reported heavy reduction in their Sales volumes. Despite this, the Company has recorded 18%  growth in the overall replacement market which could partially off-set lower sales in the OEM segment and exports growth of over 50% over the corresponding period with an overall volume growth of 100%".

The Company expects the economy to improve from the second halfofthe current year, when the volumes are expected to pick-up resulting into improvement in profitability. But no one seems convinced about that as of now.