The Indian Stock Market has stocks listed from different domains/sectors.
One of the prominent sectors: The automobile sector that has the following under its ambit
- Auto Manufacturers
- Auto Ancillary
- Gear & Axles
- Electronics etc.
Now let us focus on Tyre Industry
The Industry Leaders are – MRF, Balkrishna Industries, and Apollo Tyres
They have a vivid customer, manufacturing, and supply base which moves across continents
One of the smaller companies is JK Tyre & Industries. The stock performance for the past year is as follows:
The stock has given a return of ~100%
Considering this, is it worth investing in it?
Let us delve further into it
- JK Tyre Focusses on Commercial(Bus/Truck), Retail(Passenger Car/ Motor/Scooter), Farm, Three Wheeler, Retread Tyre Market
- Its EPS(Earning Per Share) & Book Value has been Increasing Year on Year(Y-O-Y)
- It is one of the few stocks with a P/E ~ 10 (which makes it a value buy)
- No share pledge by the promoters
- There are some red flags
- Promoters are decreasing their shareholding (shows lower confidence in the business)
- Margins will be under pressure as maintaining them will be difficult considering an increase in commodity prices and competition
- There has been a downgrade in rating by India Ratings and Research (Ind-Ra) with the outlook as negative (This makes borrowing expensive)
Considering all this, I would be cautious at entering at these levels and would like to wait out and see the management action prior to holding it in my portfolio
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