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00:00 We're now tracking JK Tires on the back of their strong Q4 earnings.
00:04 While revenue grew roughly, it was flat just a couple of percentage points on the upside.
00:09 EBITDA as well as PAT grew by roughly 28 and 55% respectively.
00:14 We're now joined by the President, Mr. Anuj Katoria of JK Tires.
00:18 Good morning, sir, and welcome to NETV Profit.
00:20 My first question is just on how the Q4 has panned out for you.
00:25 We've seen while revenues have been flat, EBITDA as well as profitability has been strong for this particular quarter as well as the financial year as a whole.
00:34 How would you describe the year for JK Tires?
00:38 Yeah, so for the Q4, as you know that we had a top line of 3714 crores, which was a growth of 2-3% on a year-on-year basis.
00:51 On the EBITDA front, we reported EBITDA of 497 crores, which is a growth of 28% on a year-on-year basis.
01:02 And this was basically on account of three things which I would call out.
01:09 One is that our efforts on premiumization have continued to give us the results.
01:14 Premiumization efforts were not only in the passenger car segment.
01:18 That was definitely one of the major areas.
01:21 But even on the truck and bus radial tires, the premium products, the XM series, the XF series, the XT series have done extremely well.
01:32 And that has definitely contributed to the overall EBITDA growth.
01:38 The other thing is that we have also enriched the network that we have.
01:43 We have also provided more than 100+ brand shops, which again has helped us to improve the overall margins.
01:53 Our operating efficiencies, better levers deployed in our sourcing strategy.
02:00 So all this put together has definitely helped us to expand our EBITDA margins by around 28%.
02:09 The next question is on commodities as well as raw materials.
02:13 We saw that the company had a benefit on both these counts in the previous financial year.
02:19 And we've seen that impact come into numbers for EBITDA as well as profitability in this financial year.
02:25 Now, sir, the company has repaid roughly 800 crores of debt in this particular fiscal.
02:30 It's come down to roughly 3700 crores.
02:34 The net debt to EBITDA has also improved to 1.75%, which was around three times last year.
02:42 What is the targeted level for this particular financial year?
02:45 So you are absolutely right.
02:47 The raw material prices, the basket had started going up even in quarter four of last year.
02:54 We have seen some commodities going up.
02:58 The trend continues in quarter one.
03:00 In fact, in quarter one, we expect that the raw material basket will go up by anywhere between three to four percent.
03:07 For the year as a whole, we expect that it would be somewhere around between six to seven percent is what we expect.
03:17 But again, we will have to find ways and means to negate this.
03:21 We have taken in the quarter one, that's the quarter we are in, we have started taking price increases.
03:29 We have also continued or actually hastened our efforts on premiumization.
03:37 We are also continuously working on our operating efficiencies.
03:40 So this is an ongoing task.
03:43 But yes, this year, we expect that because of the increase in the raw material prices,
03:49 there will be, you know, it will not be as the situation will be different and there will be challenges.
03:57 We are sure that with our efforts on the market facing as well as the back end,
04:04 we should be able to, to a large extent, negate the impact of the raw material.
04:11 Our current debt on 31st of March, 2024 was at 3,700 crores, down by 800 crores, which is 18 percent.
04:20 So this was a substantial reduction.
04:23 As you know, that going forward, we will be also repaying many of the long term debts that have been taken.
04:31 But let's also keep in mind that we have further capex plans.
04:35 We had announced our capex plans a couple of quarters back.
04:39 1,400 crores is the total capex plan, which will be executed over the next two years, FY25 and FY26.
04:47 So that also will be requiring the funds.
04:50 So overall, our plan is to maintain our overall debt level at the same level that we have achieved somewhere in the range of 3,700 crores.
05:00 And the financing of the projects and our expansion plans would be a combination of internal accruals and also certain debts that we will be taking further.
05:12 Now, my next question is on EPR provisions.
05:15 Now, this has been affecting all the tyre makers in this particular year.
05:20 And we've seen the company take an impact of roughly 100 to 105 crores for the last two financial years.
05:27 How do you see the EPR provisions in general for the next financial year?
05:32 And how much of an impact do you see as that as a percentage of sales?
05:36 See, the overall average impact would be somewhere in the range of one and a half to two percent.
05:43 But then it would be varying from category and also within the category-specific SKUs.
05:52 We are working on a very granular approach and going about our pricing strategy.
05:59 Some of them we have started on certain select SKUs we had taken in quarter four of last year also.
06:06 But we have again, once again, in quarter one reviewed and again, in most of the categories, we have taken up price increase.
06:17 The FI24, we had to take the impact of close to 106 crores.
06:22 This was the cumulative impact of FI23 and FI24 put together.
06:27 Because of various reasons and lack of clarity in how does this whole EPR thing operate and the lack of readiness, the ecosystem was not ready.
06:39 We had to procure certificates from recyclers and reprocessors.
06:44 Those things were still not streamlined.
06:46 So therefore, the industry as a whole would not do much.
06:51 But going forward, now the clarity is there and we have already started charging for the EPR as a separate line item.
07:03 We will be passing this on to our end customers.
07:07 This is absolutely in line with the international practices.
07:12 Even internationally in the markets, the cost of such extended producer responsibility or the product recycling cost is definitely passed on to the end user.
07:26 We will be also working on the same lines and actually we have started doing the same starting this quarter.
07:33 Now, my next question to you, sir, is on exports.
07:37 The market has been strong for you, roughly 16% of revenue contribution.
07:43 You also have a factory in Mexico.
07:46 How do you see the export market panning out because you have seen geopolitical crisis affecting the market.
07:53 You are also present in Africa as one of the other regions that you operate in.
07:58 So what is your outlook on exports in general?
08:01 So just to give you a basic understanding, if you start with FY23, the first half of the year was quite good for exports.
08:12 But then the demand practically tanked in Q3 and Q4.
08:17 And that trend continued into FY24, Q1 and Q2 were very sluggish.
08:23 But we saw some improvement in Q3 and Q4, the last quarter that we closed, was quite good for us.
08:31 Demand has started coming back across categories, especially the demand for the truck and bus radial from the Americas,
08:40 whether it is in the North American market or even the Latin, was quite subdued.
08:45 This was mainly because there was a buildup of inventory in the system out there.
08:51 And most of the distributors and the large dealers were carrying stocks.
08:55 But since then, they have been able to liquidate their stocks to a large extent.
09:00 And again, the offtake from these distributors, we see that this will again get initiated.
09:07 So this is good news on that front.
09:10 And we are also trying to see how we can participate more in the demand that is there in other markets,
09:17 whether it is in Europe or Middle East, African countries, Southeast Asia.
09:23 So we are actively exploring all the markets where we will be able to get better exports,
09:29 not only for the TBRs, but also in the passenger car radials.
09:35 So overall, we feel that going forward in FY25, the overall demand from various markets put together
09:43 should be better than what we saw in FY24.
09:47 [MUSIC]