Karachi: Service Long March Tyres Limited (SLM), Pakistan's leading manufacturer of truck and bus radial (TBR) tyres, has announced plans to expand its operations into the passenger car radial (PCR) tyre market. According to JS Global, SLM is poised to dominate the domestic tyre industry with a target share price of Rs28.2 by September 2027, reflecting a potential 27.5% total return when including a dividend yield of 4.8%.

SLM, a joint venture between Pakistan's Services Group and China's Long March, currently operates a facility capable of producing 2 million TBR tyres annually in Pakistan. The company plans to expand into the PCR market by increasing its production capacity to 2 million tyres initially, with a target of 3 million by 2030. SLM already commands approximately 62% of Pakistan's TBR market, a significant share in a sector traditionally reliant on imports.

The PCR market in Pakistan remains underserved by local manufacturers, leading to a heavy reliance on imports due to perceived quality issues. SLM plans to leverage its manufacturing experience, established distribution network, and proven track record in the TBR market to capture a significant share of the PCR sector.

SLM's growth strategy is built on four key drivers: strong TBR volumetric sales, cost-efficient operations aligned with Chinese benchmarks, a strategic entry into the PCR market, and a tax exemption for its Nooriabad facility until FY32. The company forecasts substantial growth in its earnings mix, with PCR profits expected to rise significantly in the coming years.

The company's recent Initial Public Offering (IPO) raised Rs7.8 billion to fund the Rs22.6 billion PCR project, which is expected to become operational in the second half of FY28. The expansion is anticipated to boost earnings, supported by a 10-year income-tax exemption, enhancing cash generation through this growth phase.

Despite the optimistic outlook, SLM faces several risks, including potential lower-than-expected growth, volatility in raw material costs, supply chain disruptions, regulatory changes, and execution challenges in its expansion plans.