JK Tyre: Highest-Ever Turnover, Raw Material Costs Bite

JKTYRE JK Tyre and Industries (NSE : JKTYRE) makes tyres for passenger cars, commercial vehicles, two-wheelers and off-highway segments. It operates plants including the Chennai facility and the Vikrant tyre plant. It is expanding truck, bus radial and passenger car radial capacity, with nearly 90% of the investment earmarked for Chennai. What happened: In Q2FY27, JK Tyre achieved its highest-ever quarterly revenue of Rs 4,850 crore, up 20% year on year. India domestic sales grew 32% and OE sales rose 65%, aided by GST 2.0 momentum. Raw material costs rose 9% sequentially, following a 22% rise in Q1FY27. Net profit fell sharply to Rs 65 crore from Rs 227 crore a year earlier, reflecting the impact of West Asia-driven input cost inflation. Why it matters: The three-phase expansion through December 2029 will increase combined TBR and PCR capacity by 24% from 210 lakh tyres per annum. Management is addressing cost pressures through product mix improvement, calibrated pricing and internal efficiencies, but the near-term margin environment remains difficult. What I am watching: Whether raw material costs stabilise or continue rising. The Chennai expansion is the primary driver of future capacity and revenue. FY26 operating margin was 12.8% and ROE was around 11%, both running well below the FY24 cycle peak of 14.1% operating margin and 19.5% ROE. My stance: JK Tyre's volume momentum is strong, led by domestic OE and replacement demand. The revenue record demonstrates market share gains. The concern is profitability: margins are under pressure from input costs that management cannot fully offset. Recovery depends on rubber and crude derivative prices easing. I do not hold a position in JK Tyre and Industries at the time of writing. This is not investment advice.