Shares of tyre manufacturers were trading weak, with the sector major MRF hitting 52-week low of Rs 31,005 on the BSE in intra-day trade.
At 11:21 AM, Ceat, MRF, JK Tyre, Balkrishna Industries, TVS Srichakra and Apollo Tyres were down up to 2% as compared to 0.28% rise in the S&P BSE Sensex.
In past two-months, Ceat (down 29%), MRF & Apollo Tyres (down 15% each) and TVS Srichakra (down 9%) have underperformed the market by falling more than 8% each, against 3.3% gain in the benchmark index.
Increasing radialisation, currency depreciation and Chinese competition have put pressure on exports for tyre companies.
Mayur Milak, analyst at Anand Rathi Share and Stock Brokers expect these issues to continue in H1 FY17; therefore, export figures may continue to be dismal. Nevertheless, anticipating greater replacement demand, a better monsoon and a revival in the rural economy, analyst expect domestic volumes to fare well.
“Margins of the tyre group were squeezed compared to the previous quarter. This was primarily due to the double impact of lower realizations due to price cuts and an increase in rubber prices toward the beginning of March 2016. So, while they reported lower raw-material costs due to low-cost inventory, we expect material costs to go up in coming quarters. That also means, however, that price cuts would be halted and the industry may soon see some price hikes to protect margins,” analyst said in report dated June 2016.
Company 18/04/2016 LTP % chg CEAT 1147.30 819.10 -28.61 MRF 36686.95 31227.95 -14.88 Apollo Tyres 173.35 148.00 -14.62 TVS Srichakra 2566.35 2335.00 -9.01 Goodyear India 514.10 515.00 0.18 JK Tyre & Indust 86.45 87.70 1.45 Balkrishna Inds 627.80 673.05 7.21 Sensex 25816.36 26688.00 3.38 LTP : Last traded price on BSE in Rs at 11:12 AM.