JK Tyre & Industries Limited — Q1 FY26 earnings call

Call held 11 Aug 2025

Management summary

JK Tyre & Industries reported a resilient Q1 FY26 with consolidated revenues growing 6% YoY to ₹3,891 crores and EBITDA margin expanding to 10.9% QoQ. Domestic operations showed strong double-digit growth, driven by both replacement and OE segments. The company continued its deleveraging efforts, reducing net debt by ₹219 crores. While the Mexico business faced margin pressure due to US tariffs, management anticipates a recovery in the coming quarters.

Highlights

  • Consolidated revenues for Q1FY26 were ₹3,891 crores, up 6% YoY from ₹3,655 crores.

  • Consolidated EBITDA margin improved to 10.9% in Q1FY26 from 10.2% in the previous quarter.

  • Profit after tax for the quarter stood at ₹155 crores, with EPS nearly doubled to ₹6.03 from ₹3.54 QoQ.

  • Net debt reduced by ₹219 crores QoQ to ₹3,862 crores, with gross debt reduced by ₹324 crores.

  • Domestic revenue grew in double-digits, with sales growth of 11% YoY, equally contributed by replacement and OE segments.

Concerns

  • Consolidated EBITDA for Q1 FY26 was ₹424 crores, down from ₹516 crores in the corresponding quarter last year.

  • JK Tornel's revenues in constant currency were MXN 1,147 million pesos, lower by 7% YoY compared to MXN 1,234 million pesos in Q1FY25.

  • Mexico business experienced negative margins in Q1FY26 due to market disruption from US tariffs and uncertainties, though management expects recovery in Q2.

Key financials

  1. Consolidated Revenue ₹3,891 Cr +6%YoY
  2. Consolidated EBITDA ₹424 Cr -17.8%YoY
  3. EBITDA Margin 10.9% +0.7%QoQ
  4. Cash Profit ₹309 Cr +17%QoQ
  5. Profit After Tax ₹155 Cr
  6. EPS ₹6.03 +70.3%QoQ

What they filed

Q1 FY27: revenue up 13.6%, net profit down 52.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,515 3,264 2,674 3,453 3,516 +40%3,741 +15%3,903 +46%3,924 +14%
EBITDA253 274 263 394 478 +89%525 +92%511 +94%284 −28%
Net profit99 55 97 154 212 +114%178 +224%204 +110%73 −53%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Domestic Operations
    ₹3,475 Cr Revenue9% YoY Growth11% Sales Growth
  • JK Tornel (Mexico)
    ₹505 Cr Revenue12% QoQ Growth1,147 million pesos Revenue (Constant Currency)7% QoQ Growth (Constant Currency)-7% YoY Growth (Constant Currency)
  • Cavendish Industries Limited
    ₹800 Cr Top Line₹51 Cr EBITDA

Capital allocation

high confidence
  • Capex ₹900 Cr larger proportion of projects funded through internal accruals rather than through loan
    • Projects under implementation ₹1,400 Cr
    • Adding capacity in passenger car segment (Tornel) $27 Mn
    Projects under implementation involving a capex of Rs.1,400 crores are progressing as per schedule. Capex outlay for the full year stands at Rs.900 -1,000 crores. (Page 5) Our planned capex in Tornel worth USD27 million is on track, which is adding capacity in the passenger car segment in the Premium category tyres, so it will further improve the margins. (Page 9) So, the larger proportion of the projects going forward will be funded through our internal accruals rather than through loan. (Page 11)
  • Debt Gross ₹3,862 Cr · Net ₹3,862 Cr · 2.4× EBITDA
    • Repayment Gross debt on a consolidated basis reduced by Rs.324 crores as on 30th June'25. ₹324 Cr
    • Repayment Net debt reduced by Rs.219 crores on a net basis from previous quarter. ₹219 Cr
    Net debt stood at Rs.3,862 crores for the quarter as against Rs.4,081 crores in the previous quarter, a reduction of Rs.219 crores on a net basis. The balance sheet of the company continues to remain healthy with robust key financial ratios. Leverage ratios, Net debt to Equity and Net debt to EBITDA were 0.74x and 2.4x as on 30th June, respectively. (Page 7) I'd like to add, that we are very much focusing on deleveraging. And we have been able to significantly reduce our net debt from a peak level in FY20 of Rs.5,400 crores to Rs.3,800 crores as of 30th June 2025. (Page 11)
  • Liquidity Cash ₹600 Cr Cash will be utilized for capacity enhancements.
    we also have cash over Rs.600 crores in our books, which will be utilized for our capacity enhancements. (Page 11)

Guidance & targets

Sustainability

  • GHG Emission Reduction Sustainability · by 2025 · High confidence 70%

    Previously 50% → 70%

    I'm happy to share that JK Tyre is already moving well ahead on its sustainability path by achieving 70% reduction in GHG emission by 2025, much ahead of the original plan of 50% reduction by 2030.

    — Anshuman Singhania

Capex

  • Full Year Capex Outlay Capex · FY26 · High confidence ₹900-1,000 crores
    Capex outlay for the full year stands at Rs.900 -1,000 crores.

    — Arun Bajoria

  • Project Start Capex · third quarter of this financial year · High confidence starting
    And from the third quarter of this financial year, we will be starting these projects.

    — Sanjeev Aggarwal

Profitability

  • Mexico EBIT Margins Profitability · Q2 onwards · High confidence 7%-8%
    Yes, we will come back to the normal levels of margins in Q2 onwards. Because of the lower revenues, the allocation of the expenses was absorbed fully.

    — Sanjeev Aggarwal

Product Mix

  • Premium Product Mix (Passenger Car Radial) Product Mix · coming quarters · High confidence 40%

    From 26% today

    So, we are planning to increase this 26% mix to around 40% in the coming quarters.

    — Anshuman Singhania

Debt

  • Net Debt to EBITDA Debt · going forward · High confidence below 2x

    Previously 1.5x to 1.8x → below 2x

    So, now we are targeting to remain below 2x, and this is a very comfortable range.

    — Sanjeev Aggarwal

Growth

  • Full Year Growth Growth · FY26 · Medium confidence better than last year
    And the full year, we see good growth coming in. It is going to be better than last year.

    — Anshuman Singhania

What to watch in Q2 FY26

Mexico EBIT margin recovery

Q2 onwards
Current Negative in Q1 FY26
Target 7%-8% (normal levels)

Why it matters

Recovery of Mexico operations is crucial for overall profitability, as it was a drag in Q1.

So that means the EBIT margins of this business, which used to be 7% -8% will come back in the coming quarter? Yes, we will come back to the normal levels of margins in Q2 onwards.

Risks & concerns

  • Global economic uncertainties and trade disruptions

    medium

    India remains a bright spot, but the world struggles with growing uncertainty and trade-related disruptions, including global fluctuations due to U.S. tariffs and geopolitical situations.

    India continues to remain a bright spot in the world struggling with growing uncertainty and trade-related disruptions. (Page 3) However, global fluctuations due to U.S. tariffs and geopolitical situation continue to pose challenges. (Page 3)

    Management acknowledged

  • US tariffs and volatility in Mexican market

    medium

    Heightened volatility in Mexico due to US tariffs and geopolitical challenges, impacting JK Tornel's performance, though timelines for tariffs have been shifted.

    Given such huge exposure to U.S., the heightened volatility continues to remain an area of concern. (Page 5) Exports remained resilient during Q1 despite the ongoing U.S. tariff related uncertainties and other geopolitical challenges. (Page 5) Yes, as you heard our Managing Director mentioning about the disruption in the Mexican market amongst other economies because of the US tariffs, the uncertainties going on around this tariff war and then they shifted the timelines from February to March, then till the end of July and now in August, they shifted by another 90 days. (Page 8)

    Management acknowledged

Q&A highlights

7 direct
Margin trajectory and impact of falling rubber prices Direct
Yes, there has been a margin improvement in this quarter versus the previous quarter with our new & innovative products which are very well received in the market and are gaining traction along with new OEM approvals. Also, the higher rim sizes tyres in the PCR category are driving good margin expansion in the replacement market as well.

Analyst sought clarity on future margin expansion given commodity price trends, and management highlighted product mix and new product approvals as key drivers.

Asked by Abhishek Jain

Benefit of Mexican peso depreciation on Mexico business realization Direct
The benefit will occur when we convert the Mexican peso to Indian rupees while consolidating the financial statements in India. So certainly, you are right, it is going to benefit us.

Analyst inquired about the financial impact of currency movements on the Mexico subsidiary's reported financials.

Asked by Abhishek Jain

Recovery of Mexico business margins Direct
Yes, we will come back to the normal levels of margins in Q2 onwards. Because of the lower revenues, the allocation of the expenses was absorbed fully.

Analyst pressed on the negative EBIT margins in Mexico for Q1 and management provided a clear timeline for recovery.

Asked by Abhishek Jain

Path to normalized profit for Mexico operations Direct
The raw material side will certainly help. We are witnessing a stability in the prices. The other areas like we have expanded our market within Mexico and our export market, which is Brazil and LATAM, we are continuously engaging with and expanding our dealers and channel partners there.

Analyst sought details on how Mexico operations would return to profitability after Q1 losses, prompting management to outline multiple drivers including market expansion and cost efficiencies.

Asked by Mitul Shah

Premium product mix and its impact on margin expansion Direct
Yes, premiumization when we are talking about in the passenger car radial, 16-inch and above in FY'23, we around 18%. And presently, now we are trading at 26% and our new capacities are also coming in for the passenger car. So, we are planning to increase this 26% mix to around 40% in the coming quarters.

Analyst asked about the contribution of premium products to margins, and management provided specific targets for increasing the premium mix.

Asked by Nilesh

Target for becoming debt-free Partial
So, now we are targeting to remain below 2x, and this is a very comfortable range. Rather we should take the benefit of the interest rates which are prevalent in India in order to get a better profitability. So, debt is not always bad, if it is well managed.

Analyst asked about a long-term debt-free target, and management clarified their focus is on maintaining a healthy net debt to EBITDA ratio rather than being debt-free, leveraging current interest rates.

Asked by Nilesh

Full year growth guidance and price hikes Direct
Yes, in Q1 the Raw material prices have actually declined by nearly 2.5% on a quarter-on-quarter basis and there has been a flattish net sales realization, which is the price increase on a quarter-on-quarter basis. Our growth of 11% in the domestic markets is from the volume push, which has helped, and we continue to do that both in the OEM and in the replacement market, which has really helped us, and going forward also, we continue to focus on that.

Analyst sought quantification of price hikes and full-year growth expectations, to which management explained that Q1 growth was volume-driven despite flattish realizations.

Asked by Nandan Pradhan

Capex schedule and potential delays Direct
It is progressing very well and as per schedule. And from the third quarter of this financial year, we will be starting these projects. And then, of course, ramp-up will happen over the next 6 months period.

Analyst asked for an update on the ₹1,400 crores capex, confirming it is on track and will commence in Q3 FY26.

Asked by Nandan Pradhan

3 min read 6 chapters

Detailed narrative

Strong Domestic Performance and Market Penetration

JK Tyre's domestic operations delivered a robust performance in Q1 FY26, with revenues growing 9% YoY to ₹3,475 crores. Overall sales growth stood at 11% YoY, driven equally by both replacement and OE segments. The company expanded its market reach by onboarding over 240 new dealers and 35 exclusive brand shops across India, alongside adding 40 new fleet accounts, nearing the 1,500 mark. Volumes in both commercial and passenger categories achieved the highest sales this quarter, supported by strong brand-building initiatives.

Mexico Operations Facing Headwinds but Expecting Recovery

JK Tornel, the Mexican subsidiary, reported revenues of ₹505 crores in Q1 FY26, up 12% QoQ. However, in constant currency, revenues were MXN 1,147 million pesos, down 7% YoY. The business experienced negative margins in Q1 due to market disruptions caused by US tariffs and related uncertainties, which led to a shift in tariff timelines. Management expects a return to normal EBIT margins of 7-8% from Q2 onwards, driven by market expansion in Brazil and LATAM, and new product development like ATV tyres for the US market.

Margin Expansion Driven by Product Mix and Operational Efficiency

Consolidated EBITDA margin for Q1 FY26 improved to 10.9% from 10.2% in the previous quarter, a 70 bps QoQ expansion. This improvement was attributed to new and innovative products, higher rim sizes in the PCR category, and enhanced operational efficiencies. The company aims to further increase its premium product mix in the passenger car radial segment from the current 26% to 40% in the coming quarters, which is expected to drive further margin accretion.

Deleveraging Continues with Healthy Capital Structure

JK Tyre continued its deleveraging journey, reducing gross debt by ₹324 crores and net debt by ₹219 crores QoQ, bringing the consolidated net debt to ₹3,862 crores as of June 30, 2025. The net debt to EBITDA ratio stood at 2.4x. Management highlighted a significant reduction in net debt from a peak of ₹5,400 crores in FY20 and stated a target to maintain the net debt to EBITDA ratio below 2x going forward. The company also holds over ₹600 crores in cash, earmarked for capacity enhancements.

Strategic Capex and Sustainability Commitments

The company has projects under implementation totaling ₹1,400 crores, with a full-year capex outlay planned at ₹900-1,000 crores for FY26. These projects are progressing as per schedule and are expected to commence from Q3 FY26, with ramp-up over the subsequent 6 months. A significant portion of future capex will be funded through internal accruals. In sustainability, JK Tyre is ahead of its original schedule, targeting a 70% reduction in GHG emissions by 2025, surpassing the earlier goal of 50% reduction by 2030.

Auto Industry Trends and Outlook

The auto industry's performance in Q1 FY26 was relatively flat overall, but growth in tractors, 2-wheelers, 3-wheelers, and exports helped. Domestic commercial vehicle volumes remained flat, while exports registered a high growth of 23% YoY. The PV segment continued to perform well, with an increased share of SUVs and overall PV sales crossing 1 million units. The Indian tyre industry is projected to grow 7-8% in FY26, driven by strong domestic replacement demand and continued premiumization.

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