Tyre stocks: As the demand forecast improved, the shares of tyre manufacturers such as JK Tyre & Industries Ltd (up over 10%), MRF Ltd (up 4.5%), Apollo Tyres Ltd (up almost 6%), Ceat Ltd (up over 12.4%), TVS Motor Company Ltd (up 2%), and Goodyear India Ltd (up 5.4%) were on a bull run. According to reports, in reaction to rising costs for essential raw materials, domestic tire makers raised their prices by around 1.5% to 2.5% starting on July 1, 2024 (natural rubber).
In their analysis, ICICI Direct Research said that this is encouraging for the home tyre market given the extraordinary increase in natural rubber costs, which are currently trading at almost ₹200/kg (an 11-year high). The majority of tire businesses had projected a 4-5% increase in raw material costs for Q1FY25 compared to Q4FY24 (natural rubber was quoted at around ₹180/kg), and they indicated that they would partially pass on the increases to end users through ~1-2% price hikes.
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“This move shall limit margin fall at the domestic tyre companies with most of them expected to realise and sustain mid-teens EBITDA margin profile. This price hike in our view however does not fully cover the recent rise in RM costs,” said ICICI Direct Research in its report.
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Regarding specific stocks, a news report states that stockbroker Emkay has maintained its “buy” rating for JK Tyre, with a price target of ₹700 per share. According to Emkay’s channel check, indications and the fundamentals of the transportation business are sound. As of the financial year 2026, it anticipates that the commercial vehicle sector will begin an upcycle.
JK Tyre manufactures tires, tubes, and flaps for automobiles. It primarily serves the transportation and commercial vehicle industries. The brokerage said that Indian tire producers are still catching up to global producers. It also mentioned that premiumisation and increasing demand are two further benefits for the industry.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 28 Jun 2024, 04:23 PM IST