Apollo Tyres, CEAT and JK Tyre & Industries hit their respective 52-week high levels on Tuesday, as easing crude oil prices and a fall in natural rubber prices are seen lifting margins for tyre makers. Adding to the gains is the optimism over demand, especially in the replacement market.
Apollo Tyres surged for the third day in a row to hit a fresh 52-week high of Rs 318, before settling the day at Rs 314.95, up 0.61 per cent. CEAT jumped for the fourth consecutive day to hit a fresh one-year high of Rs 1,952.80. The stock eventually settled 0.63 per cent higher at Rs 1,929.05.
JK Tyre gained hit a 52-week high of Rs 203.95. The stock finally settled 1.06 per cent higher at Rs 195.85. This was the fifth straight day of gains for JK Tyre.
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Larger peer MRF also extended gains for the fifth straight day. It settled 1.17 per cent higher at Rs 92,556.90.
Analysts largely remained ‘positive’ on the tyre industry amid softening of natural rubber prices.
Tyre sector looks comfortably positioned going forward with auto demand looking strong, especially in the PV and CV segments, said Ashwin Patil, Senior Research Analyst at LKP Securities.
“The replacement demand too remains robust on the back of strong demand in FY19 considering the fact that the tyre replacement cycle on average is about 3-3.5 years. On the profitability front, we believe that softening of natural rubber and crude prices shall augur well for the tyre sector. Operating leverage as well shall come into the picture as capacity utilisation levels which had dropped in the last two years should normalise. Debt and capex levels also should be moderate in the coming years. The sector looks positive to us,” Patil said.
Meanwhile, crude oil benchmarks erased some losses today after sliding to their lowest levels in nearly a year during the previous session. Oil rebounded on hopes that China would relax its Covid-19 controls after rare protests.
Q2 results
Elara Capital in a note said Apollo Tyre’s standalone revenue rose 17 per cent (YoY), but dipped 4 per cent (QoQ) to Rs 4,250 crore. CEAT’s revenues rose 19 per cent YoY while MRF’s were up 18 per cent YoY. Standalone Ebitda margin for Apollo Tyres rose 60 basis points (bps) QoQ; MRF’s was down 40 bps while CEAT’s was up 130 bps.
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Indian equity benchmarks settled at record highs today, extending their gains for the sixth straight session.
