Tyre Sector Surges Today, Making Indi Ride the Wheels Tyre stocks have done well in the trade today. The shares of the sector have gained between 2% to 7% in the trade. There have been a lot going in the sector of late.
Indian Tyre Industry Outlook: Automotive industry production which gained 8% during FY2015, decelerated to 2.3% in FY 2016. However, Year To Date growth has been robust. The structural tailwinds point to sustenance of this trend and an annual production growth of around 7% during FY2017. 3% growth in volumes demand from the Original Equipment Manufacturer (OEM) segment, together with a 5-6% growth in replacement volume demand is estimated to have resulted in a 4-5% growth in domestic tyre demand in India during FY2016. A stronger growth of 7.1% and 21.4% respectively in the OEM and replacement segment boosted the domestic demand by 15% during FY2015; the slowdown in OEM demand was felt across all segments barring CVs. Following a 17% gain during FY2015, imports continued to record healthy double-digit growth of 12% during FY2016, driven by unabated inflow of cheaper Chinese tyres in the Truck & Bus Radial (TBR), Passenger Vehicle (PV) and Two-wheeler (2W) segments. Largely in line, revenues in the domestic tyre industry de-grew by 2%, led by a 6%-8% fall in realizations although volumes grew by 4%-5%. The industry benefited significantly from the fall in input costs; Natural Rubber prices fell by 15% during FY 2016 leading to a 470 bps operating margin expansion to 19.1%. This was despite the increase in employee expenses. Employee costs as percentage of revenues had increased from 5.0% in FY2013 to 7.0% in FY2016. The industry-wide revenue growth is estimated at 4-6% for FY2017 as against an estimated negative growth of 2-4% for FY2016. It also adds that the profit margins are likely to remain at elevated levels with bearish outlook on rubber and crude oil prices, but current levels are unlikely to be sustained over the next 12-18 months.
Also, accentuating a major need for skilling in rubber and tyre sector, Government has shown its enthusiasm to open a national institute to cater to the training needs of the sector. This will boost the industry furthermore. Tyre stocks: Company Name MRF Apollo Tyres Balkrishna Ind Ceat JK Tyre & Ind TVS Srichakra Govind Rubber
Last Trade d Price 49,899. 25 190.80 989 1,290 121.90 3,515.0 0 21.7
1.62 3.64 6.86 5.89 4.01 2.36 6.37
Today, Balkrishna Industries share price surged the most with 6.86% surge. The stock closed at Rs. 993 while it had opened at Rs. 930. This is a top 500 recommended stock by Dynamic Levels. Govind Rubber share price followed the lead by surging 6.37% to last trade at Rs. 21.7. Another top 500 recommendation and the costliest share in the history of stock market, MRF share price surged almost 2%. Apollo Tyres share price gained almost 4% and Ceat share price rose almost 7% intraday today. Both the stocks are top 500 recommendations for the quarter. JK Tyre and TVS srichakra, the Multibagger Stocks from Dynamic Levels were last traded at Rs. 121.90 and Rs.3,515 . JK tyre share price had surged 4% in the trade today while TVS srichakra share price gained 2.36%. The surges have made the Tyre space a little more attractive for the investors.
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Article Written by Tanaya Nath
Published on Dec 2, 2016