Shares of Apollo Tyres, CEAT and JK Tire & Industries hit their 52-week highs on Tuesday as a slide in crude oil prices and fall in natural rubber prices see a rise in tire makers’ margins. Adding to the advantage is optimism on demand, particularly in the replacement market.
Apollo Tires touched a 52-week high of Rs 318 for the third consecutive day before closing 0.61 per cent higher at Rs 314.95. CEAT jumped for the fourth consecutive day to hit a one-year high of Rs 1,952.80. The stock finally closed at Rs 1,929.05, up 0.63 per cent.
JK Tire touched a 52-week high of Rs 203.95. The stock finally closed at Rs 195.85, up 1.06 per cent. It was the fifth straight day for JK Tyre.
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Larger peer MRF also extended gains for the fifth straight day. It closed at Rs 92,556.90, up 1.17 per cent.
Analysts remained broadly ‘positive’ on the tire industry amid softening natural rubber prices.
Ashwin Patil, Senior Research Analyst, LKP Securities, said that the tire sector is growing comfortably, especially in the PV and CV segment, showing strong auto demand.
“Replacement demand also remains strong on the back of strong demand in FY19 considering the fact that tire replacement cycle is around 3-3.5 years on an average. On the profitability front, we believe natural rubber and raw Moderation in oil prices will be good. For tire sector. Operating leverage will also come into picture as capacity utilization levels which had fallen in last two years should normalize. Debt and capex levels should also moderate in coming years The sector looks positive for 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 in hopes of China relaxing its Covid-19 controls after rare protests.
Apollo Tire’s standalone revenue grew 17 per cent (YoY) but declined 4 per cent (QoQ) to Rs 4,250 crore, Elara Capital said in a note. CEAT’s revenue grew 19 percent year-on-year while MRF’s revenue grew 18 percent year-on-year. Standalone EBITDA margin for Apollo Tires up 60 basis points (bps) QoQ; MRF was down 40 bps while CEAT was up 130 bps.
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Indian equity benchmarks closed at record higher levels today, extending their gains for the sixth straight session.