Tyre stocks in focus; Balkrishna Ind rallies 9%, hits fresh record high

Shares of tyre manufactures were in focus with Balkrishna Industries surging 9 per cent to hit a record high of Rs 1,481 on the BSE on Monday on the back of heavy volumes. Optimism was seen on the counter on expectation of healthy demand and margin outlook. The stock surpassed its previous high of Rs 1,467.80 touched on August 29, 2018.

Balkrishna Industries Limited (BIL) is engaged in the business of manufacturing and selling of Off-Highway Tyres (OHT) in the specialist segments such as agricultural industrial and construction earthmovers and port mining forestry lawn and garden and All Terrain Vehicles (ATV).

The latest industry export data continues to remain strong with both segments (agri, OTR) returning to growth path together for the first time since December 2019. The latest monthly (Aug'20) industry export data continues to support V-shaped demand rebound across agri tyres at 42 per cent year on year (YoY) and off-the-road (OTR) tyres at 13 per cent YoY.

"Q1FY21 had closed with an overall export decline of 23 per cent YoY. However, in Jul-Aug'20, exports increased 26 per cent YoY. On an end-product basis, agri tyre segment led exports with 37 per cent rise while OTR grew 6 per cent. BIL could also benefit from the improving demand traction due to its superior product offerings across segment and rising brand recognition," analysts at ICICI Securities said in stock update. The brokerage firm maintains 'buy' rating on the stock with target price of Rs 1,671 per share.

Among other tyre stocks, Apollo Tyres, Ceat, MRF and JK Tyre were up 3 per cent to 7 per cent on the BSE, as compared to 1.3 per cent rise in the S&P BSE Sensex at 12:20 pm.

The upcoming festive period and expected continual pickup in economic activity would guide future offtake but on a full year basis ICICI Securities expect discretionary spend related segments i.e. 2-wheelers, passenger vehicles (PV) to post around 15 per cent YoY fall while commercial vehicles (CV) space drop-off set to be sharper at 25 per cent plus.

Tractor industry, however, is seen growing in single digits for the year. The brokerage firm expects healthy double-digit revival in volumes across segments in FY22E on the back of low base and expected improvement in general economic activity levels.