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JK Tyre & Industries Ltd's Q3FY18 consolidated net profit declines 87.27% yoy to Rs10.97cr : Misses Estimates

IIFL 2018-02-13 10:39:00

JK Tyre & Industries Ltd Q3FY18

Consolidated Results Q3FY18: (Rs. in crore)

Q3FY18 YoY (%)
Revenue 2,123.24 15.5
EBITDA 212.90 [15.8]
EBITDA Margin (%) 10 [372]
Net Profit (adjusted) 10.97 [87.3]
***EBITDA margin change is bps
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Know More JK Tyre and Industries Limited (JKTIL) reported lower than estimated numbers for Q3FY18, bogged down by Mexico operations. Consolidated revenue was up 16% yoy at Rs2,123cr. Revenue was better than consensus estimate of Rs2,090cr by 2%. Higher input costs led to EBITDA decline of 16% yoy to Rs213cr. This was 10% lower than consensus estimate pegged at Rs237cr. Consolidated EBITDA margin in Q3FY18 contracted 372bps yoy to 10%. Net profit after EO plunged 87% yoy to Rs11cr, significantly lower than consensus estimate of Rs39cr.

Other Highlights
  • Operating performance during the quarter was affected by higher raw material expenses. While rubber prices stabilized in Q3FY18 after rising more than 27% over the past two years, crude oil prices, which constitute more than 40% of JKTIL’s input costs, continued to be a cause of concern. For Q3FY18, natural rubber prices declined 2.2% yoy and 2.5% qoq. On the other hand, crude oil price increased 18% yoy and 16% qoq. Going ahead, price trajectory of crude will be a key item to monitor.
  • Input cost inflation could continue to exert pressure on operating margin in the subsequent quarters due to effect of high cost inventory. Hence, we do not expect EBITDA margins to improve materially in the next 2 – 3 quarters.
  • Within segments, Mexico operations played spoilsport. Revenue from Mexico operations declined 17% yoy to Rs232cr. Revenue from India operations was up 9% yoy at Rs2,075cr. Indian operations contribute 90% to revenues, while Mexico operations contribute the remaining 10%.
  • EBIT from India declined 5% yoy to Rs165cr, while EBIT margin contracted 121bps yoy to 8%. EBIT from Mexico plunged into loss of Rs16cr in Q3FY18 against EBIT profit of Rs8cr in Q3FY18. The management attributed the dismal performance in Mexico during the quarter to an ongoing labour restructuring exercise at Tornel. Hence, we will continue to monitor progress on this front in the coming quarters.
  • During Q3FY18, JKTIL reported exceptional expenses worth Rs10.20cr. In Q3FY17, it reported exceptional gains worth Rs60.35cr on account of sale of assets. If we ignore the impact of these exceptional items, PAT in Q3FY18 would have been Rs21cr against Rs26cr, a decline of 18% yoy.
  • The Board approved fund raising plans worth Rs1,000cr. The route to be used for fund raising and other details are yet to be finalized.

Technical View:

JK Tyre & Industries Ltd ended at Rs. 188.10, up by 11.2 points or 6.33% from its previous closing of Rs. 176.90 on the BSE.
The scrip opened at Rs. 180 and touched a high and low of Rs. 192.95 and Rs. 180 respectively. A total of 48,79,782(NSE+BSE) shares were traded on the counter. The stock traded below its 200 DMA.