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JK Tyre & Industries to hike product prices by 2–4%
JK Tyre & Industries has decided to hike product prices by 2–4% in an attempt to offset the
effect of rising input costs, especially natural rubber. The price hike comes on expected lines
as prices of natural rubber are at an all-time high. Domestic prices of RSS-4 rubber in
Kottayam on January 17, 2011, stood at `225/kg. Rubber prices increased by ~65% yoy in
3QFY2011; while on a qoq basis, prices grew by ~10% in 3QFY2011. We expect rising
raw-material costs to pose a major challenge to the company to maintain its operating
margins. At the CMP of `122, the stock is trading at attractive valuation of 3x its FY2012E
earnings. We maintain Buy on the stock with a Target Price of `202.
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