JK Tyre & Industries Ltd
NSE:JKTYRE
Earnings Call Analysis
Q3-2024 Analysis
JK Tyre & Industries Ltd
The company has achieved a year-over-year volume growth of 6%, with a quarter-over-quarter increase of 5%. Looking ahead, the executive anticipates a volume growth of 6% to 7% in upcoming quarters. This optimism is backed by recent capital expenditures (CapEx) aimed at premium segments, such as passenger car radials (PCR), truck radials, and all-steel products, which are expected to enrich the product mix with higher-margin items.
Management has been successful in rapidly reducing debt levels through efficient working capital management and equity infusions of around INR 740 crores. The company doesn't foresee an increase in debt levels, projecting the debt-to-equity ratio to remain between 0.5 to 0.7 (currently at 0.75) and suggesting that margins will sustain or possibly improve. The company has been repaying approximately INR 400 crores of debt annually, and with profitability on the rise, financial positioning is seen as very favorable.
Upon completing its latest projects and ramping up production, the company expects to achieve revenues between INR 18,000 crores to INR 19,000 crores. Additionally, there has been a focus on maintaining margins in the 13% to 15% range, with the ability to pass on fluctuations in raw material costs to customers, which further stabilizes profit levels.
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Hello. Ladies and gentlemen, good day, and welcome to JK Tyre & Industries Q3 FY '24 Earnings Conference Call hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Chirag Jain from Emkay Global Financial Services. Thank you, and over to you, sir.
Thank you, Aditya. Good evening, everyone. On behalf of Emkay Global Financial Services, I would like to welcome you all to the 3Q FY '24 earnings conference call of JK Tyres. Today, we have with us from the management team, Mr. Anshuman Singhania, Managing Director; Mr. Arun K. Bajoria, Director and President, International Operations; Mr. Anuj Kathuria, President, India Operations; Mr. Sanjeev Aggarwal, Chief Financial Officer; and Mr. A. K. Kinra, Financial Adviser.I shall now hand over the call to the management for their opening remarks, post which we'll open the floor for Q&A session. Over to you, sir.
Yeah. Thank you. On behalf of JK Tyre and the family, I wish you and your families a very Happy New Year 2024. It is in immense pride I share with you that all financial year 2024, so far has been very noteworthy achievement in our businesses. Amongst many JK successfully completed a QIP of INR 500 crores, which received an overwhelming response from the marquee investors reinforcing confidence in our growth story. This is in addition to INR 240 crores raised from IFC [indiscernible] in March '23 by way of preferential issues.Talking about quarter three FY '24 performance, JK Tyre continued to pursue profitable growth centered on product premiumization, volume expansion and improved product mix. Quarter three witnessed is a significant improvement in the operating profitability and achieved an EBITDA of INR 563 crores on a revenue of INR 3,700 crores. The net debt at INR 3,456 crores registered a 24% reduction from the levels recorded in March '23. Return ratios have also improved significantly over March '23. Strong momentum in the economic activity and positive consumer sentiment across product categories continued to provide tailwinds to both automobile and tire industry.In quarter three, JK Tyre has clocked a volume growth of 7%, mainly contributed by replacement and OEM segment, which grew by 11% and 6%, respectively, over the corresponding quarter. However, export has seen a volume reduction of 8% due to political, geopolitical disturbances and supply chain disruption. The ongoing capacity expansion projects for TBR and PCR are progressing as per schedule and full production ramp-up will be achieved by end of FY '24. We have further announced an implementation of capacity expansion in TBR, PCR and all-steel light truck radial tires for an aggregate cost of INR 1,400 crores.Recently, JK Tyre hosted its 19th edition of Indian Tire of the Year and the Indian Motorcycle of the Year Award 2024, the most coveted and prestigious award in the Indian automobile sector, a platform created by JK Tyre. CV segment continued to witness high single-digit growth with demand supported by government impetus on infrastructure, mining and construction, growth in coal industry and rising tourism and sustained growth in the e-commerce activity. The PV segment growth trajectory continued for two consecutive financial years with the introduction of new models launched and positive sentiment towards SUV.The PV sales growth momentum is expected to continue going forward. On the tire sector outlook, demand momentum continues to be steady in the domestic market. We remain optimistic for the tire sector in the medium- to long-term. The demand is primarily driven by private sector CapEx, high vehicle utilization, increased disposable income and it's mentioned earlier impetus on infrastructure developments. On export outlook, the global environment continues to remain challenging as the supply chain disruption has erupted on account of Red Sea crisis, which has increased the ocean [ freight ]. However, the demand is on a recovery trajectory in the global market.On the channel development, during the quarter, we added 35 brand shops and 40-plus [ fleet ] customers to enhance our brand presence in the replacement segment. We are continuously growing our network in an identified [ voice ] basis. We have further strengthened our presence for supplies of XM, XF and [ XV ] series tires in the E-buses and the CV models across OEMs. Our thrust on increasing R&D spend will further enhance our range of innovative products in the portfolio. Focus on ESG is one of our key strategic priorities. We are investing in renewable energy at all our plants to become more sustainable. We are committed to deliver strong operational and financial performance with a focus on growth plans. The same will enable us to deleverage the balance sheet further and enhance stakeholder value.Now I request Shri Arun Bajoria Ji to talk about the performance of JK Tornel Mexico.
Thank you [indiscernible] sir. On JK Tornel Mexico, in Q3 FY '24, JK Tornel Mexico displayed resilience sustaining robust performance in both overall revenue and profitability. The challenges associated with the lower number of working days typical of the third quarter being December being a Christmas month, Tornel achieved a turnover of MXN 291 million, which is equivalent to INR 620 crores, maintaining stability on a year-on-year basis.Operating profits at EBITDA levels remained slightly lower at MXN 102 million equivalent to INR 49 crores, showcasing the company's consistent financial strength. Notably, JK Tornel retained its leadership position in the Mexican PCR market, enjoying the highest market share among all the Mexican tire manufacturers who are even foreign companies, but manufacturing in Mexico. To further strengthen its market presence, the company is actively gearing up for the launch of new brand of PCR tires.Earlier, the performance was affected by the continuous appreciation of the Mexican peso impacting exports. However, the gradual increase in private consumption in Mexico, coupled with positive per capita income growth is fostering a supportive environment for domestic demand, a trend expected to persist in the coming quarters. We actively participated in the world's largest tire exhibition, the SEMA show held in Las Vegas during quarter three of FY '24. The positive response received from customers at this event underscores the company's strong market position and customer satisfaction.Now I would request Shri Aggarwal Ji to brief about the financial performance of Q3.
Thank you, sir. I will briefly share the key highlights for Q3 FY '24. The first one is the consolidated sales were recorded at INR 3,700 crores vis-a-vis INR 3,643 crores in Q3 FY '23, which is up by 2% on a Y-o-Y basis. Profit at EBITDA level in the quarter was recorded at INR 563 crores as against INR 349 crores in the corresponding period, an impressive increase of 61% on Y-o-Y basis. Operating profit margins are recorded at 15.2% on a consolidated basis. Operating margins were sustained during the quarter despite some increase in raw material prices.Cash profits doubled to INR 456 crores during the quarter. Profit after tax was INR 227 crores, more than 3% increase on Y-o-Y designs -- 3x increase on Y-o-Y basis. Consolidated capacity utilization was 85%. Consolidated exports stood at INR 570 crores, which is slightly lower than the previous corresponding quarter last year. Subsidiary companies, Cavendish Industries and JK Tornel Mexico continued to perform well and have contributed significantly to the revenues and profitability on a consolidated basis. Cavendish Industries Limited posted a topline of INR 900 crores with EBITDA at INR 140 crores, registering an operating margin of 15.6% and profit after tax was INR 50 crores.Earnings per share improved to INR 8.52 per share as against INR 2.66 per share in Q3 last year. Return ratios have significantly improved. ROCE and ROE were in high teens. Pretax ROCE was 19.7% and ROE was 19.4%, respectively. Net debt stood at INR 3,456 crores as on 31st of December '23, which is lower by 24% over March '23 levels. Leverage ratios improved significantly over March '23.Net-debt-to-equity improved to 0.75x in this -- in Q3 FY '24 as against 1.29x at the end of March '23 and net-debt-to-EBITDA improved again substantially to 1.72x in Q3 FY '24 as against 3.39x as at the end of March '23. The balance sheet of the company is now much healthier with improved financial ratios, which -- and we have circulated our earnings presentation, which is available at our website as well on the website of stock exchanges.Now we open the forum for Q&A. Thank you.
[Operator Instructions] Our first question is from the line of [ Aditya Agarwal ] from [ Omkar Capital ].
What is the revenue mix by market for India operations for the quarter?
Revenue mix of the India operation. So the -- in the India operation, the replacement market for the India operation Q3, it is 61%. OEM is 26% and export is 13%.
And what is the revenue mix by product line for India operations for Q3?
Truck, bus, which includes truck bias and truck bus radial, it is 62%. Passenger line radials, 23% [indiscernible] is 5% and non-truck bias is 11%.
Our next question is from the line of Aditya Rathi from Aequitas Investment.
Sir, we see that the sales has grown only 2% Y-o-Y. So I just wanted to know the volume change.
So the volume has grown from the corresponding and consolidated 6%.
This 6% is Y-o-Y, right, sir?
Yes. So our third quarter corresponding to the third quarter last year.
Right. And then Q-o-Q?
Q-o-Q consolidated is 5% growth.
5% growth. And sir, what about the coming quarters? What do we expect?
Sorry. The Q-o-Q -- quarter-on-quarter is negative 5% -- not plus.
Right. Right, sir. And sir, going forward, what are we expecting, sir, in terms of volume?
So we are expecting -- we are very optimistic on our outlook in terms of the growth in the market, which is led by the infrastructure growth. There is a lot of positive sentiment going forward, be it the replacement market and the OEMs. And we have seen that we should participate in that momentum of growth. Private sector CapEx as I read out has -- is coming back the CapEx cycle [Technical Difficulty].
Sorry, sir, could not hear you, there was a crack in your voice. Hello? [Technical Difficulty]
We are expecting. So I think Anush Ji mentioned that 6% to 7% volume growth we are expecting going forward.
Okay, perfect. Sir, did we take any price hike or price cut in this quarter? [Technical Difficulty]
Is from the line of Chirag Jain from Emkay Global.
Sir, I had a couple of questions broadly in terms of the CapEx that we are doing and also the upcoming CapEx that we have already announced, bulk of the CapEx is happening on the PCR side. And that's a fairly significant CapEx that we are incurring. So can you just throw some light? And so just to understand or get some more visibility in terms of how we would be ramping up, let's say, business on the PCR side, gaining market share.In fact, last five years, we have been gaining even, let's say, this year, so far, we have been gaining, let's say, profit pool compared to the other tire companies that we have so far that they have delivered results. So some confidence, if you can or let's say some comments with respect to the marketing side, distribution side, apart from the capacity increase that we are doing on PCR, how we can ramp up the operations over year.
So as you know that we are already -- we are going to be completing our announced CapEx by FY '23 -- '24. And further to that, we have announced INR 1,400 crore CapEx, which is in the category of PVR and PCR and all-steel radial as well. So we see that market for us, we should participate in the growing market. In quarter three, the domestic volumes we witnessed a 7% growth over the corresponding quarter.Replacement market volume grew by 11%, and OEM volume grew by 6%. So as earlier question, we are seeing the market growth nearly 6% to 7%. So these earlier announced capacities are helping in participating in the fueling growth, plus our play of premiumization has also helped in terms of better profitability. So going forward, as we are reaping the benefit of the new investments also which are going to come in, we are going to be definitely participating in the growing market.
Okay. So apart from the growth since bulk of the growth will be coming from PCR, which I believe is far less margin accretive compared to the company average. Do we see an upward bias on margins from a 2-, 3-year standpoint? I understand there could be quarterly fluctuations because of commodity swings. But from a 2-, 3-year standpoint, do you think there's an upward bias on margin profile?
You see that our new CapEx has been in the radial line. And as I said, that PCR and truck radial and all-steel, they are all high-margin products. And this is going to be adding ultimately high profitability. So as we go along, the high-margin products are going to be enriching our product mix. Yes, going forward, some of the vagaries in terms of commodity price [Technical Difficulty] will also insulate us to some extent of the vagaries because we will be participating in the higher profitable higher rim sizes and enriching our product mix as we are going along.
Okay. And just last thing before I come back in the question queue. In terms of debt reduction, it has been quite fast over the past few quarters. How do we see next 2, 3 years, the overall debt equity position, sir?
So Chirag, in fact, what we are seeing that there is a very rapid reduction in the last few quarters, which we have been able to achieve efficient working capital management and the kind of equity, which has been coming into the company. Over the last 9 months, in fact, we have raised about INR 740 crores, which is mainly for the purpose of CapEx and the projects announced. But going forward also, because of the increased profitability and also we have taken up these projects in phased manner.So we do not see any increase in debt levels from the present. And the debt-to-equity will remain in the range of about 0.5 to 0.7, which is today at 0.75. So we are expecting this would be there and also debt-to-EBITDA as we are seeing that the margins will sustain or rather improve further. So the debt-to-EBITDA will also improve further. And today, as I told you that we are at 1.72x.So we are hoping that this will remain in the range of 1.5x to 1.8x in spite of the fact that we are going ahead with some of the expansion projects, which will contribute, of course, to the greater profitability and the revenues. And therefore, the margins will improve and the debt levels will remain within a very tight range. And also, we have been repaying almost about INR 400 crores of debt every year. So keeping in view all these facts, I think we would be in a much better situation going forward.
On one hand, profitability is going up. On the other hand, we have raised equity. And on the third hand, the working capital management is being properly utilized so that the total borrowings are less. So financially, I think we are in a very happy situation at the moment.
Our next question is from the line of [ Bharat ] from [ Living Root ].
I would like to ask that -- ultimately you were saying that we are scheduled to complete our CapEx programs by FY '24. So what will be the peak revenue potential as per the CapEx programs once the CapEx programs are complete?
Well, the earlier CapEx plan, which was announced, so that is around INR 800 crores, that will commence, which is progressing well. That will commence by -- sorry, sorry, quarter two FY '24. And we are looking at INR 18,000 crores to INR 19,000 crores.
So this is a mix of -- so once -- so quarter two FY '25, I think you are seeing by June, July of this current year, right?
In fact, what Anshuman Ji is mentioning is that the production has started out of the latest projects which we have completed and the ramp-up is happening. And the kind of capacity we have built up a complete ramp up, let's say, in the first quarter, we will be achieving of the financial year FY '25. And then we will be in a position to achieve INR 18,000 crores to INR 19,000 crores of revenue.
Okay. Okay. So meaning the ramp-up will already -- so you're saying the production has already started and the ramp-up will happen.
Ramp up is happening at this point in time.
Okay. And you see that much demand to sort of do that much revenue because I think in this quarter, I missed the first initial part of the call, five minutes -- so I think the revenue was -- revenue growth compared to last quarter in September was slightly lower. So if you can just touch upon the reason again, please?
No, this is actually as per the studies conducted by CRISIL and other such agencies there is a growth of about 6% to 7% in the tire sector, right? And this is likely to continue over the long period of time. And in the -- on a quarter-on-quarter basis, we see that there could be a slight reduction. But overall, Indian volumes have gone up. So for example, as we mentioned earlier, replacement market has grown already at that pace and.
JK Tyre in terms of the volume growth for the quarter three has been an overall 7% where replacement grew by 11% and OE grew by 6%.
So we are expecting the growth in the industry to be -- to continue in the long run and there could be some reason of, let's say, some disturbance geopolitically in the export market or maybe in the international business and all. So -- but those are very temporary in nature.
Okay. Okay. So one more thing I think on the raw material part, of course, crude is -- you have already mentioned Sanjeev Ji and others also that crude you're comfortable up to a level of $85 a barrel. But if you talk about the other major component that is natural rubber so that price in the last few months have gone up. I mean, from like INR 140 to around INR 160, INR 165 now. So what role does that play because that is also a decent component of your raw material basket isn't it?
So as we mentioned earlier also that we have been actually ring-fencing the margins and margins in the range of about 13% to 15%. And there could be some fluctuation in one raw material or the other in the past case. But that is not likely to impact the company's profitability because we will be in a good position to pass on. A large part of it could be with some lag or lag effect. But I think we are good to go with as long as the demand is there and because we are expecting a good demand increased growth going forward. So the margins will be maintained in a healthy range of about 13% to 15%.
Okay. Okay. Okay. And then one [ funny ] question, if I can just squeeze in for Mr. Kathuria that -- how do you see the CV cycle right now? Because I think this is -- this year is expected -- the current financial year of FY '24, we're seeing the highest ever sales of CVs. So going ahead, what's your outlook on the CV industry?
No, I think he was on the line, Mr. Kathuria, but I think there is some reception issue. But to take that question, the understanding is that that CV market, yes, you are right. CV market, we are seeing some sluggishness, but this is going to be very short term. As the economy is also fueling up and the core sector growth is coming in, we're seeing that CV cycle market and the demand coming back. But it is not going to drop that much. It is going to be at a stable level.
Our next question is from the line of Mitul Shah from DAM Capital.
Congratulations for a very strong EBITDA margin performance vis-a-vis peers. Sir, first question is on volume growth. When we are indicating 7% growth -- am I audible? So 7% volume growth is for Q4 or going forward even '25, '26 we'll witness similar growth? And on that only in case if we are assuming 7% growth and OEM, CV as well as tractor sales are coming down on a Y-o-Y basis. So that means OEM growth would be more or less slight or marginal growth that implies that replacement growth should be 12%, 15% type of number. Is that assessment, right, sir? [Technical Difficulty]
Your question is finished?
Yes, yes.
Yeah. So there has been a -- we witnessed a volume growth of 7% in Q3. And here, replacement volume grew by 11% and OEM grew 6%. We see that momentum continuing for the next quarter as well. But going forward, there could be some slight volume growth, which would -- might come a little lower in the OEM because of the sluggishness in the truck space. But the overall -- we maintain that 6% to 7%, the automotive will definitely grow. And please also don't forget that this growth of overall 7% has also come at that quarter of October, November, December, where there is always a New Year and there's always a model change and et cetera.
So the replacement growth will continue to remain double digit, right?
Yes. Yes, absolutely.
Sir, second question on debt side, when we are saying that debt will not increase from this level. So sir, broader calculation is that we are saying INR 1,400 crores CapEx for the next two years. We already have INR 700 crores kind of cash at balance sheet. And nearly, we are generating INR 1,400 crores, INR 1,500 crores cash flow every year now debt on the current last three, four quarters performance. So that implies that out of almost INR 3,000 crores operational cash and INR 700 cash crores on balance sheet, we will be able to reduce our debt by more than INR 1,000 crores or INR 1,500 crores in next two years. So why we are saying that it will be more or less in the similar range.
So overall, the debt today, which is as at 31st of December was about INR 3,500 crores overall on net debt basis. So which is going to go down further, as we are expecting and [indiscernible] better cash flows going forward with increased revenues and increased profitability. And because today, we have taken up some of the projects. New loans will come in, but the repayment is also happening at the same time. [Technical Difficulty] in case some more projects are taken up going forward then the broad levels of [indiscernible] debt-to-equity will be in the range of 0.5% to 0.7% still.
However, the new project will depend on the market demand and the conditions But as of now, we see that the debt levels will go down further at a very fast pace.
Okay, sir, lastly on this Mexico operation, we are hearing that in U.S. and North America may increase tariff on all the imported tires. So is there any update on that? And in that case, can we ramp up our Mexico operation to capitalize this benefit? What is the utilization and potential in the plants in terms of increasing manufacturing?
At this point of time, the utilization level is around 81%. And therefore, we have some possibility to increase the capacity utilization, and we are planning on and -- there is no question of the reduction of the export quantities from Mexico to USA. [Technical Difficulty] Can you please mute your thing, ma'am? You are disturbing the other proceedings.
[Operator Instructions] Our next question is from the line of Aditya Rathi from Aequitas Investment.
Sir, I just wanted to know how this CapEx of INR 1,400 crores will phase out and when do we plan to start the commercial production of it?
The new CapEx of INR 1,400 crores will commence by Q3 FY '26.
Q3 FY '26. Hello? You mentioned Q3 FY '26, right?
Yes.
Okay. And sir, last question, sir, I wanted to know how the raw material basket has moved from last quarter to this quarter? And what do we expect it going forward?
So we have -- the quarter -- on a quarter-on-quarter basis, the raw material prices we have seen in the tune of 2%.
Do we expect it to be stable here or do we expect any movement going forward?
No, we see that raw material prices will remain [indiscernible] in the quarter four FY '24.
Our next question is from the line of Shashank from ICICI Securities.
Sir, just one small clarification on the CapEx part. So we are already executing INR 1,100 crores of CapEx before and in the last quarter we announced INR 1,025 crores CapEx putting together [ INR 200 cores ] of CapEx plan. So this [indiscernible] part of the same plan or this is from incremental CapEx that we are supposed to do?
That is incremental CapEx. This is mainly the PCR -- this is an incremental CapEx because the earlier expansion which we were implementing for INR 530 crores for PCR that has already been completed. The ramping up is happening for production increase. So that has already been completed as we have discussed earlier also and this is an incremental CapEx for the PCR. And for others also we have announced INR 261 crores for TBR and INR 112 crores for the all-steel radial tires for all-steel LTR tires [indiscernible].
Starting FY '23 till '26 so this full year period, what will be -- what is the entire CapEx spend, the growth CapEx spend?
So as we said INR 790 crores has already been completed and the production ramp-up is happening. And then we will be implementing INR 1,400 crores of expansion CapEx.
INR 2,200-odd-crores, right? In total, INR 2,200-odd-crores?
Yes.
And we will be spending something like INR 250 crores of maintenance CapEX each year as well. So, sir then in terms of cash flow outflow, sir, how do we see the CapEx outlook for this year and next year in terms of the CapEx spend?
I think we have discussed already. We have been implementing the projects in phases and [indiscernible] the next two years period. So this funding of these CapEx will happen from -- through a mix of debt and equity. The equity part has already raised of about INR 500 crores recently, and the balance will come from internal [indiscernible] and the debt.
But sir, from a cash flow perspective, then eventually, we should be spending like INR 1,000 crores each year, right, '24, '25, '26.
Including the normal CapEx, INR 250 crores to INR 300 crores, that's correct.
Our next question is from the line of Mitul Shah from DAM Capital.
Sir, one clarification when we told that revenue potential of INR 18,000 crores to INR 19,000 crores, that is including this INR 800 crore CapEx only or we consider this INR 1,400 crore CapEx post debt potential goes to INR 19,000 crores.
Actually, that is only with the existing projects, which we have recently completed. And the new CapEx, which will come in only in quarter three of FY '26. So that is not included in this.
So after that, what could be revenue potential, including the INR 1,400 crore of CapEx maybe after two years?
1.1 to 1.2 ratio of assets to turnover. I think we will add another maybe about INR 1,600 crores.
Okay, sir. And second on Cavendish, we are already now at a 15.5%, 16% type of EBITDA margin. So is there any further scope for improvement in margin with the utilization or product mix or it is the optimum level for Cavendish now?
Beyond 15.5%, which we have issued in Q3.
Yeah. So actually, if you see, we have been working on premiumization and improving our product mix. So that exercise will continue. But also, we have seen that there was an impact of 2% on raw material prices. So if everything were to be favorable going forward, definitely, there will be an opportunity to improve the margins further on operations. But we also need to keep in mind that some of the other as Sanjeev Aggarwal Ji earlier explained that the raw material basket, some of the components of the raw material basket may be volatile.So we will have to watch those carefully, both in terms of crude as well as in terms of natural rubber. So in case those turn out to be favorable, and our efforts on premiumization also are going to be giving us the results. Then yes, otherwise, as we say, for our industry, it is at 13% to 15% is something which we expect, which is a stable guidance that can be taken.
Sir, lastly, on Mexico operation, again, this quarter was Q-on-Q sequentially, slightly weaker. Anything onetime, any specific thing or going forward how we expect performance in terms of volume as well as margins?
Well, going forward, the revenue should be improving. And the markets, of course, we are expecting them to be better. As I said earlier, that our capacity utilization in 2024 is expected to be better than 2023.
But nothing specific for Q3 in terms of number of days or holidays or anything?
No. Q3, as I said, that 17 days of December are lost due to the Christmas holidays so therefore the -- as I've said in my opening remarks that the Q3 is affected because of the lesser number of working days.
Our next question is from the line of [ Rahil Shah ] from [ Crown Capital ].
How was the M&HCV demand in quarter three? And how is it likely to be in quarter four?
So when you're talking about M&HCV demand, the OE -- from the OEs the demand was sluggish, I would say. It was almost flat as compared to the earlier quarters. So there, we are seeing that quarter four is generally a good quarter. So we expect that the demand should come back in quarter four, although we have to wait -- watch this very carefully because as we know that the M&HCV is the -- in the overall commercial vehicle is cyclical, but M&HCV has the largest amplitude in cyclicality. And last two, three years we have seen that there is a upcycle.So we have to wait and watch that where are we on the cycles? Are we kind of flattening out or is the upcycle going to continue? One thing which I would like to definitely say that buses are doing very well. In fact, the demand for the bus bias is quite robust, especially the tubeless radials and also the demand in the mining and construction -- that is also holding up quite well. And we hope that the infra push that is there from the government will continue. So that also should help us generate the demand. But when we look at the replacement market, I think so the replacement market, the demand is quite good as of now also. And we expect that going forward it will continue to remain robust for the tires in the replacement market.
Okay. And this 13% to 15%, you said sustainable margin steady state. You meant for like a specific business arm or on consol level you said for Q4 and going ahead in the next year as well?
So this 13% to 15%, we said was on a longer-term basis on a steady state, but we will have to see. One of the major things that we have to watch very carefully is the raw material basket.
Right. Okay. And can you just give me the JK Tornel revenue this quarter?
This quarter, we have mentioned INR 620 crores. I converted the peso millions into rupees.
Okay. Okay. And any sharing any guidance for next year revenue growth?
We are working towards improving this revenue going forward in 2024.
Our next question is from the line of Chirag Jain from Emkay Global.
Sir, just had one question with respect to the competitive scenario because growth has somewhat been slow in the current quarter and even RMS also stabilized. Any signs of discounting or price cuts or any major sort of a competitive action that we are seeing in the market in general? Any thoughts around that?
Chirag, Anuj here. So basically -- you are asking about the pricing. If you can see that when the raw material costs are going up, we had actually taken a lot of price increases, and we were able to pass on most of the impact of the raw material that was there into the market, although it happened at a lag. But in this year, we have seen that the raw material prices have been rather range bound. We saw a marginal increase of 2% in between quarter two and quarter three. We expect that going forward, this will be there.On the pricing front, it is very difficult to give you a very straight answer for the simple reason that every segment plays out differently. And within the segment also, we have now worked on premiumization. So there are certain niche SKUs, what we call as the power SKUs, where we have taken certain price increases. But in general, we are trying to see that finally, the pricing is a function of the supply and demand in the marketplace, the market forces. So segment-to-segment, as SKU-to-SKU the team navigates. But overall, if you see, is there a reduction in the overall price or the [ NSR ], I think so it has been more or less in the same range. SKU-by-SKU, there have been certain variations.
Okay. So broadly, the market is fairly stable from a competitive landscape perspective, no major change per se.
Yes.
Our next question is from the line of [ Bharat ] from [ Living Root ].
I just missed one question. I wanted to ask regarding the tax rate. So in the previous quarter, you had mentioned that from the next year, we are moving to a 26% tax rate. So we're still on track for that.
Yes. We are very much on track, and we will be consuming the entire [indiscernible] credit available within this financial year. And we will move forward from -- next year onwards, we will be moving into the new regime.
As there are no further questions from the participants, I now hand the conference over to management for closing comments.
Okay. Thank you so much for joining this conference call and I wish you all a good year ahead.
Thank you. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us and you may now disconnect your lines.