JK Tyre ; Madhucon:: 1QFY2012 Result Review- Angel Broking,

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Madhucon Projects

MPL reported a disappointing performance on the top-line front, with a yoy decline of

19.2% to `329.2cr (`407.4cr), below our expectations of `481.0cr. The company’s OPM

came in at 14.1% (10.7%), posting a whopping jump of 340bp yoy against our

expectations of 10.1%. On the earnings front, the company posted a decline of 41.0% yoy

to `8.0cr (`13.5cr), against our expectations of `11.7cr. We would be revising our

numbers and target price after the call with the management. The stock rating is currently

under review.

JK Tyre

JK Tyre reported a weak bottom-line performance for 1QFY2012 on account of

contraction in operating margin and high interest cost. Net sales during the quarter

reported healthy 21% yoy (5% qoq) growth to `1,413cr. On the operating front, the

company posted an 11.8% yoy (4.2% qoq) decline in operating profit to `65cr, as

operating margin dipped by 170bp yoy (44bp qoq) to 4.6%, primarily due to raw-material

cost pressures in the form of higher rubber prices. As a result, raw-material cost to sales

ratio stood at 77.3% of sales during 1QFY2012. However, margin erosion was arrested

due to a 67bp and 155bp yoy reduction in staff cost and other expenditure, respectively.

Net profit witnessed a substantial 95% yoy (92.3% qoq) decline to `1cr, primarily due to

margin contraction and a substantial increase in interest expense.

At `104, the stock is trading at 3.5x and 5.8x FY2013 earnings and EV/EBITDA,

respectively. We continue to maintain our Buy rating on the stock; however, our target

price is under review. We shall release a detailed note shortly.