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Shares of tyre makers were in focus and rallied up to 13 per cent on the BSE in Monday’s intra-day trade amid reports that the tyre-makers are to hike prices, effective July 18.
Among individual stocks, JK Tyre soared 13 per cent to Rs 510.90, Ceat 7 per cent to Rs 2,813, TVS Srichakra (6 per cent at Rs 4,805.75), Apollo Tyres (6 per cent at Rs 548), Goodyear India (Rs 1,234) and MRF (Rs 134,280.70) were up nearly 4 per cent and Balkrishna Industries (up 2 per cent at Rs 3,174.55) on the BSE in today’s intra-day trade. At 01:27 pm; these stocks were trading higher by up to 8 per cent. In comparison, the BSE Sensex was up 0.39 per cent at 80,834.
According to a CNBC TV18 report, MRF bumped up its rates for truck tyres by 2 percent, while the prices for passenger car tyres and radial tyres were increased by 3 – 7 per cent. There was no hike in the prices of two-wheelers as of yet, reported the TV channel.
Last month, media reports stated that domestic tyre companies undertook a price hike of 1 – 2.5 per cent with effect from July 1, 2024, in response to rise in key raw material prices (primarily natural rubber).
The price rise comes as a sign of relief for the domestic tyre industry amidst unprecedented rise in natural rubber (NR) prices which are currency quoting at around Rs 200/kg (11 year high), ICICI Securities had said in a note.
Most of the tyre companies had guided for 4 – 5 per cent rise in raw material costs for Q1FY25 versus Q4FY24 (wherein natural rubber was quoting at Rs 180 per kg) and indicated at partial pass on the same to end consumers through 1 – 2 per cent price hike.
This move shall limit margin fall of the domestic tyre companies with most of them expecting to realise and sustain mid-teens EBITDA margin profile. This price hike in our view, however, does not fully cover the recent rise in raw material (RM) costs, ICICI Securities said in its June 28 note.
With rising international prices and the end of the peak production season in India, coupled with the export incentive of Rs 5/kg, Natural Rubber prices surged to Rs 185/kg in March 24 from Rs 150/kg in Q3FY24. Additionally, port restrictions on Natural Rubber imports continued in India, with imports only allowed at Nhava Sheva and Chennai ports. The inverted duty structure on natural rubber at 25 per cent or Rs 30/kg, whichever is lower, persisted throughout the year, leading to a 23 per cent rise in local Natural Rubber prices during FY24, Apollo Tyres said.
Meanwhile, the tyre sector is expected to witness steady demand, supported by the government’s persistent focus on infrastructure development and increasing consumer confidence. The overall outlook for the tyre industry remains positive.
Raw material prices remained stable in the early part of the year but showed an upward trend during the later part. The domestic NR availability is inadequate and industry is making efforts to enlarge plantations in the North Eastern states to encourage enhanced domestic production, JK Tyre said in its FY24 annual report.
The tyre industry is expected to grow at a healthy pace, as the Indian automotive sector is expected to reach a size of $300 billion by FY2026-27. To capitalise on this opportunity, JK Tyre has focused on deleveraging and strengthening its balance sheet throughout the year, positioning the company for a high-growth trajectory, the company said.
Meanwhile, commercial vehicles are likely to show muted growth in the current year. Growth of passenger vehicles may moderate considering the high base and strong growth in the last 3 years. Industry body the Society for Indian Automobile Manufacturers (SIAM) expects a 3 to 5 per cent growth in financial year 2025. Two wheeler sales are showing signs of improvement and this may continue into the current year, considering favourable monsoon and likely improvement in rural demand.
First Published: Jul 15 2024 | 2:12 PM IST