Raw Material –  

Tyres manufactured in India have a ratio of 40% natural rubber and 50% of synthetics (petrol derivatives). The remaining 10% consists of miscellaneous inputs like steel.

Domestic tyre industry derives close to 60% of its volume from the replacement market and 28% from auto companies.

Tyre Prices rising on the surging raw material prices

12 March Update 

Car tyre prices are about to increase by up to ₹2,000 for a pair, while the luxury car tyres will witness a hike of up to ₹6,000 for a pair.

The main reason behind the rise is the increase in the cost of raw materials. The cost of raw materials has shot up by a margin of around 25%. However, another reason is the restrictions on importing of rubber, due to which the supply has been affected. The restrictions were put up in August last year, and have been continuing since. The restrictions delay have increased the delivery times making the supply slow.

In Q3 FY21, the tyre manufacturers increased the price by 2% and by the end of March 2021, there was another 3-4% hike. CEAT had increased prices by around 3 percent in December and another 3 percent hike was passed on to the consumers in the March quarter.

Tyre marketers say it won’t be possible for them to take the entire brunt of the raw material price hike which would require a 8% – 10% rise which in unviable in the marketplace.

Leading Tyre Manufacturers Market Share

Company  MHCV Tractors Passenger Vehicle Two/Three Wheeler
Apollo Tyres 24% 19% 35% 1%
MRF 32% 24% 31%
JK Tyre 22% 9% 5%
CEAT 9% 8% 31%
TVS Srichakra 29%
Goodyear India 30% 5%
Source: Nirmal Bang

Revenue Breakup

Company Replacement Market OEM Exports
Apollo Tyres 75% 16% 9%
JK Tyre 68% 17% 15%
CEAT 58% 27% 15%

 

Apollo Tyres Key Customers

Apollo-Trye-Service

JK Tyre Key Customers

JK-Tyre-Service

CEAT Key Customers                        

Ceat-Tyre-Service

Balkrishna Industries Key Customers       

Balkrishan-Trye-Services     

Q3FY21 Performance Snapshot

Company Net Sales Var (%) PAT Var (%) P/E Q3FY21 Q2FY21 Q3FY20
Dec-20 YoY QoQ Dec-20 YoY QoQ latest OPM OPM OPM
MRF 4642 13.88 9.36 520.54 115.71 22.42 21.32 22.42 21.47 17.08
Balkrishna Inds 1509 30.58 -4.35 325.07 45.25 35.39 29.93 35.39 35.5 32.6
Apollo Tyres 4965 14.22 17.28 443.81 155.27 21.1 109.36 21.1 3.12 12.68
JK Tyre 2769 25.89 21.74 224.09 1946.48 19.76 34.23 19.76 17.03 11.47
CEAT 2221 26.08 12.27 132.14 150.31 14.91 18.93 14.91 15.65 10.85
Goodyear India 514.34 20.66 6.91 48.97 312.21 15.53 19.85 15.53 16.41 7.05
TVS Srichakra 572.7 12.42 3.68 36.27 183.80 14.02 21.62 14.02 15.83 10.14

Top Picks

Balkrishna Industries

Balkrishna makes Agriculture, Industrial and Off- Road Tyres. 49 % Revenue of the company comes from Europe with agriculture segment contributes 61% to the revenue of the company. BKT has reported a healthy 9% volume CAGR growth over the last decade as compared to global Off the Road (OTR) Tyre industry’s growth of about 4-5%. Balkrishna Industries registered 30.6% YoY increase in revenues to Rs. 1500 Crore in Q3FY21. BKT’s agri tyre market share stood at 7% with pan-India presence across the country. The company continues to focus on market share gains through domestic presence where it sees more potential. Market share in agri tyres in Europe stands at 12-15% and US at 7-10%. The company has Highest OPM in Tyre Industry.

CEAT

Trucks and buses contribute 33% to the total revenue of the CEAT whereas 2W/3W contributes 30% to the total revenue of the company. The company reported strong growth in revenue of 26% YoY in Q3FY21. With CV demands back on the recovery the company is expected to perform in next quarters also. The company is trading at lower valuation as compared to its peers. Margins of the Company improved from 10.85% in Q3FY20 to 15.65% in Q3FY21. CEAT had increased prices by around 3 percent in December and another 3 percent hike was passed on to the consumers in the March quarter which will help to maintain margin to some extent.

JK Tyre

JK Tyre has its large presence in the CV market realizes 60-65% revenues from CVs and farm segment. The company targets to reduce its Long term debt by 40-45% over next two to three years which help the company to reduce its debt to equity ratio which is stood at 2.4. Having strong presence in replacement market, company reported strong growth in Q3FY21.

Source: Company, EWL Research, Capitaline Software Database

                                                              

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