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JK Tyre posted a strong Q1 with consol revenue up 6% YoY and EBITDAM up by 70bps QoQ to 10.4% (7% beat on absolute EBITDA). India revenue growth at 9% YoY (Q4FY25: 6%) was led by robust growth in OEM/replacement demand across categories. SA EBITDAM rose by 200bps QoQ to 11.9%, on gross margin expansion (amid flattish RM prices) and operational efficiencies. The mgmt guided to double-digit revenue growth in FY26 on sustained growth in replacement (TBR/PCR up 7%/32% in Q1), improved demand outlook for the OE segment (led by upcoming festive, new model launches), and robust exports momentum. Lower RM prices in Q2 with strategic price hikes and improving product mix (rising share of +16inch rim size tyres) would further aid margin. JK Tornel (Mexico) is seeing better demand visibility due to better clarity on US tariffs (expects share of US exports to increase), enhanced focus on domestic markets, and continued ramp up in exports. The demand/margin cycle for the tyre industry is turning positive and margin revival looks promising. FY26E/27E EPS is unchanged. We retain BUY and TP of Rs460 at 12x Jun-27E PER.

Healthy revenue performance with margin expansion

Consol revenue up 6% YoY to Rs38.7bn; EBITDA down 20% YoY; however, consol EBITDAM expanded by 70bps QoQ to 10.4% led by operational improvement and strategic pricing despite high NR prices. SA revenue up 15% with EBITDA up 12% YoY; EBITDAM expanded by 200bps QoQ to 11.9%. Cavendish/Tornel (Mexico) revenue fell 15% YoY with EBITM down by 390/140bps QoQ to 3.5/-0.9%. Adj PAT down 31% YoY.

Earnings Call KTAs

1) The management expects the tyre industry to grow 7-8% in FY26 and upheld its double-digit consol revenue growth guidance, led by replacement (TBR/PCR up 7%/32% YoY in Q1), expected improvement in OEMs (on the upcoming festive season, new model launches), and a sustained robust momentum in exports (up 39% YoY in Q1) despite geopolitical challenges. 2) Lower RM prices in Q2 aided by premiumization-led improvement in the product mix (JK targets 40% share from the +16inch rim size tyres vs 26% now), strategic cost optimization, and better operating leverage (higher volume) would aid margins. 3) For JK Tornel (Mexico), the mgmt highlighted an improving demand outlook led by easing in monetary policy, better visibility around US demand (clarity on the tariff situation); it has already seen improvement in Jul-25; of the total exports from Mexio, USA accounts for ~7-8%, which the mgmt expects to keep rising over coming months owing to a 90-day pause in the tariffs/products being USMCA compliant; along with a deepening domestic presence in Mexico (via engagement with dealers, channel partners), Tornel has ramped up exports to Brazil and LatAm; with USD27mn capacity expansion (focused on high-margin, larger rim-size tyres) concluded, Tornel is placed well to capture opportunities in PCR and Light Trucks. 4) The Rs14bn expansion in PCR, TBR, and all-steel light truck radials (ASLTR) is on track; capacities are expected to come online from Q3 with ramp up in subsequent quarters; these are margin accretive. 5) Consol capacity utilization: 80%; radial at over 85%. 6) FY26 capex guidance: Rs9-10bn.

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