Tyre stocks in demand; JK Tyre rallies 15%, MRF scales fresh high

Shares of JK Tyre & Industries hit a 52-week high of Rs 103.80 amid heavy volumes

Shares of tyre companies hogged the limelight in Wednesday's session and rallied up to 15 per cent on the BSE after Ceat reported a strong operational performance for the quarter ended December 2020 (Q3FY21).

Ceat, on Tuesday, said that in Q3FY21, its Ebitda (earnings before interest, taxes, depreciation, and amortization) margin improved by 460 basis points (bps) to 15.3 per cent over the previous year quarter. The stock of the auto tyres and rubber products company hit a 52-week high of Rs 1,352 today, having surged 12 per cent in the past two trading days, post its Q3 results.

The company’s consolidated net profit more-than-doubled to Rs 132 crore in Q3FY21 from Rs 53 crore in Q3FY20. This quarter’s growth has been achieved on the back of new capacities across segments, particularly passenger car, two-wheeler and farm segments. The replacement market has been buoyant of consumer preference in personal mobility and strong demand.

The management is confident of maintaining strong growth levels over the next few months. However, there is expected to be some margin pressure in the next quarter due to increasing raw material prices, it said.

Shares of JK Tyre & Industries too hit a 52-week high of Rs 103.80, up 15 per cent, amid heavy volumes and ahead of its Q3FY21 results on January 21, 2021. The trading volumes on the counter more-than-doubled and a combined around 20 million equity share changed hands on the NSE and BSE till 12:07 pm.

Last week, Cavendish Industries, a subsidiary of JK Tyre & Industries, reported record performance for Q3 as Ebitda jumped 128 per cent year-on-year (YoY) to Rs 157 crore. Sales were up 30 per cent YoY at Rs 788 crore over the previous year quarter.

The management said increased volumes in truck tyres, both radial and bias, LCV and agricultural tyres have contributed to higher sales.

"The demand recovery in the market is quite robust across segments. The larger commercial tyres are also moving well with replacement demand clocking 30 per cent growth and OEMs offtake slowly coming back. Cavendish looks forward to sustained improvement in sales and profitability in the coming period," said Dr Raghupati Singhania, chairman of the company.

Among other individual tyre stocks, MRF hit a record high of Rs 90,500, up 4 per cent, while, Apollo Tyres rose 7 per cent to hit a 52-week high of Rs 202 on the BSE. Balkrishna Industries, TVS Srichakra and Goodyear India were up between 4 per cent and 6 per cent as compared to a 0.52 per cent rise in the S&P BSE Sensex.