JK Tyre gains 9% on strong operational performance in September quarter

The management said the profitability during the quarter improved significantly due to aggressive cost-cutting measures.

Shares of JK Tyre & Industries gained 9 per cent to Rs 66 on the BSE in the early morning trade on Thursday after the company reported a strong operational performance with margins hitting a four year high of 15.6 per cent in July-September quarter (Q2FY21).

In Q2FY21, the company reported PBIDT (profit before interest depreciation and tax) of Rs 367 crore against Rs 303 crore in the corresponding quarter of the previous fiscal year. Consolidated revenue from operations rose 5.6 per cent to Rs 2,275 crore from Rs 2,155 crore in the year-ago quarter. Net profit, however, declined 38 per cent year-on-year (YoY) to Rs 105 crore, primarily due to the low effective tax rate in the base quarter. It had posted a profit of Rs 170 crore in Q2FY20.

The management said the profitability during the quarter improved significantly due to aggressive cost-cutting, more particularly fixed costs. The company could achieve savings in interest costs due to its ability to reduce its working capital requirements, it said.

"The company achieved higher sales on the back of economic recovery, more so in the automotive sector, which has taken place during the quarter. The company was well-positioned to take benefit of this emerging opportunity, and as a matter of fact, it could achieve healthy sales in the replacement market, doing better than the industry," the management added.

Based on the indicators of future economic conditions, the company expects to recover the carrying amount of these assets and ensure that sufficient liquidity is available.

At 09:28 am, JK Tyre was trading 7 per cent higher at Rs 64.60 on the BSE, as compared to a 0.33 per cent decline in the S&P BSE Sensex. The trading volumes on the counter jumped over five-fold with a combined 3.2 million equity shares changing hands on the NSE and BSE so far.