One with aggressive management

JK tyre

Current price – 103

Target – 240

Timeframe – 1.5 years

Raw material of tyre is rubber and prices of rubber have gone up by 250% in last 1.5 years and that’s the main reason of bad health of tyre industry despite robust demand. Prices of rubber have been going up because of supply and demand mismatch which would improve sooner or later and prices of rubber are not at sustainable levels. In the near term prices can go up even further but this is the stock which can be averaged fearlessly if stock goes down. This stock might test your patience for some time so you would need to give it at least 1 year to see the true colors.

The Company is making efforts to make the facility in Chennai operational in the current year which was earlier scheduled for commissioning in middle of next year. The plant will have a capacity to produce 2.5 million passenger car tyres and 450,000 units of truck, bus radials every year. Apart from this, company plans to venture into power sector by setting up a 1,360 MW power plant near Jhansi in Madhya Pradesh. Which is bit of a diversification but I feel power is the safest business to diversify into, so I’m not worried on that front too. Some time back stock touched 70 levels and now has crossed 100 and if results of this quarter do not come out well which is very much probable then you may get it at sub hundred levels as well. So I would suggest putting only 35% of your intended money for this stock so rest you can average with if needed.

Thanks.