 "Tyre shares extend gain; MRF, TVS Srichakra up over 8%")
Shares of tyre companies were trading higher for the third straight trading session on expectation of an improvement in pricing power due decline in Chinese imports and falling rubber prices.
MRF and TVS Srichakra rallied more than 8% each, while Goodyear India, JK Tyre & Industries, Balkrishna Industries, Ceat and Apollo Tyres were up 3% to 7% on the BSE. On comparison, the S&P BSE Sensex was down 0.03% at 29,429 at 01:07 pm.
MRF hit a record high of Rs 57,959, up 9% on BSE in intra-day trade.
In past three-trading sessions, all these stock have outperformed the market by surging up to 13% against 1.7% rise in the benchmark index.
However, thus far in calendar year, except Balkrishna Industries (up 19%), the remaining tyre stocks had underperformed the market by gaining less than S&P BSE Sensex, which up 8.6% till March 8, 2017.
According to analysts at Phillip Capital said Chinese factories have nearly stopped catering to the demand from Indian importers after the US international trade commission determined that the US tyre industry hasn’t been materially injured by imports of truck and bus radial (TBR) tyres from China.
As the US is a highly profitable market, Chinese manufacturers have shifted their focus to that country. To add to the importers’ woes, Chinese players have hiked prices by 10?15% for the Indian market, making imports less lucrative.
Meanwhile, Thailand rubber prices have tumbled by more than 20% from their recent highs with floods receding, Shanghai exchange inventory rising by 43% from recent lows, and Thailand releasing rubber from its inventory (which it had bought to support farmers).
This should provide relief to tyre companies, which would otherwise have faced margin pressures due to increasing rubber prices. In addition, domestic players have already taken measured 3?5% price hikes recently. Altogether, with Chinese imports declining very sharply, we expect companies’ pricing power to improve, as importers are now unlikely to bounce back any time soon,” said Nitesh Sharma and Dhawal Doshi in the research report.
MRF and TVS Srichakra rallied more than 8% each, while Goodyear India, JK Tyre & Industries, Balkrishna Industries, Ceat and Apollo Tyres were up 3% to 7% on the BSE. On comparison, the S&P BSE Sensex was down 0.03% at 29,429 at 01:07 pm.
MRF hit a record high of Rs 57,959, up 9% on BSE in intra-day trade.
In past three-trading sessions, all these stock have outperformed the market by surging up to 13% against 1.7% rise in the benchmark index.
However, thus far in calendar year, except Balkrishna Industries (up 19%), the remaining tyre stocks had underperformed the market by gaining less than S&P BSE Sensex, which up 8.6% till March 8, 2017.
According to analysts at Phillip Capital said Chinese factories have nearly stopped catering to the demand from Indian importers after the US international trade commission determined that the US tyre industry hasn’t been materially injured by imports of truck and bus radial (TBR) tyres from China.
As the US is a highly profitable market, Chinese manufacturers have shifted their focus to that country. To add to the importers’ woes, Chinese players have hiked prices by 10?15% for the Indian market, making imports less lucrative.
Meanwhile, Thailand rubber prices have tumbled by more than 20% from their recent highs with floods receding, Shanghai exchange inventory rising by 43% from recent lows, and Thailand releasing rubber from its inventory (which it had bought to support farmers).
This should provide relief to tyre companies, which would otherwise have faced margin pressures due to increasing rubber prices. In addition, domestic players have already taken measured 3?5% price hikes recently. Altogether, with Chinese imports declining very sharply, we expect companies’ pricing power to improve, as importers are now unlikely to bounce back any time soon,” said Nitesh Sharma and Dhawal Doshi in the research report.
| % returns | |||
| COMPANY | LATEST | 1 day | 3 days |
| TVS SRICHAKRA | 3340.00 | 8.91 | 13.39 |
| MRF | 57500.00 | 8.53 | 10.76 |
| GOODYEAR INDIA | 768.00 | 6.93 | 8.71 |
| APOLLO TYRES | 194.10 | 4.52 | 7.86 |
| JK TYRE & INDUST | 128.80 | 4.04 | 9.52 |
| BALKRISHNA INDS | 1383.50 | 3.49 | 5.68 |
| CEAT | 1260.80 | 3.07 | 8.36 |
| S&P BSE Sensex | 29432.46 | -0.03 | 1.74 |
| Latest price on BSE at 01:07 pm | |||
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