Major tyre companies witnessed a notable surge in their stock prices during April, with some registering gains of over 15%. This surge is primarily due to the falling prices of crude oil and natural rubber, which are key raw materials used in tyre manufacturing.
Additionally, market optimism over demand, particularly in the replacement market, has contributed to driving stock prices higher. The shares of major tyre companies such as MRF, Ceat, and JK Tyre & Industries rose between 6% and 15.20% during last month, while other stocks, including Goodyear India and Balkrishna Industries, witnessed gains ranging from 3.40% to 11.30%.
Moreover, shares of Apollo Tyres reached a new record high of ₹353.3 apiece on April 28, and from its June low of ₹176, the stock has generated a return of almost 97% to date. Similarly, TVS Srichakra shares have also grown significantly in the last ten months, generating a return of 84%.
Since the start of 2023, crude oil prices have been falling due to concerns about interest rate hikes, growing recession fears, and uncertainties surrounding Chinese demand. For the last eight months, Brent crude futures have been trading below the $100 mark.
Although OPEC+ announced an unexpected cut of over one million barrels per day in April, crude oil prices have remained low due to the slower-than-expected recovery in China, which is the largest importer of crude oil.
According to a recent report from rating agency ICRA, the Indian tyre industry is expected to see revenue growth of 7-9% in the current fiscal year. The agency forecasts domestic tyre demand to grow at a rate of 6–8% for FY2024, driven by sustained demand in the OEM segment and stable growth in the replacement segment.
ICRA predicts that the demand momentum in the OEM segment will continue in FY2024, with an estimated growth of 8–10%, while replacement demand, which forms around two-thirds of tyre demand, is likely to witness mid-single-digit growth in FY2024.
While the El Nino occurrence and its potential impact on rural demand is monitorable, factors like improving economic activities, increasing freight movement, higher spend on infrastructure, absence of material price hikes, etc. shall support the growth in the replacement segment in FY2024, it stated.
On overseas shipments, ICRA noted that it expects export demand to be subdued for the next one to two quarters, although the long-term outlook remains favourable, given the strong acceptance of Indian tyres in the overseas markets.
Earlier in January, the Automotive Tyre Manufacturers Association (ATMA) said the Indian tyre industry will be able to scale a turnover of ₹1 lakh crore in the next three years on the back of new capacities available.
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