Tyre stocks rally up to 8% on MRF's strong Q4 results; Apollo at 52-wk high

Shares of tyre makers rallied up to 8 per cent on the BSE in Wednesday's trade after MRF posted strong results, with the company’s consolidated profit after tax (PAT) more-than-doubling to Rs 341 crore in the January-March quarter (Q4FY23). The company had posted PAT of Rs 165 crore in the year-ago quarter. Revenue from operations increased 10 per cent to Rs 5,842 crore, as against Rs 5,305 crore in Q4FY22.

MRF's board has recommended a final dividend of Rs 169 (1,690 per cent) per share of face value of Rs 10 each. The company has already declared and paid two interim dividends of Rs 3 (30 per cent) per share each for the financial year ended March 31, 2023. The total dividend for the financial year FY23 ended 31 March 2023 works out to be Rs 175 (1,750 per cent) per share.

Reacting on strong performance, the stock of MRF rallied 6 per cent to Rs 94,254.80 on the BSE. Among others, Ceat, JK Tyre & Industries, TVS Srichakra, and Goodyear India surged between 5 per cent and 8 per cent. In comparison, the S&P BSE Sensex was down 0.32 per cent at 61,160 at 03:07 PM.

According to JK Tyre, the automobile industry is witnessing huge tailwinds on the back of the government’s push towards infrastructure development, higher GDP growth, and large allocation of funds towards capital expenditure in India.

"Improved vehicle utilisation, due to last mile connectivity and vehicle scrappage policy, is leading to a cyclical uptrend in the automobile and tyre industry. The automotive industry accounts for almost 49 percent of India’s manufacturing GDP, with tyre manufacturers contributing to 2 per cent and demand is expected to grow further," the company said.

Meanwhile, Apollo Tyres hit a fresh 52-week high of Rs 357, up 3 per cent on the BSE. In the past one week, the stock has gained 8 per cent on expectation of a robust performance in Q4FY23 amid QoQ decline in realised raw material prices.

Analysts at ICICI Securities expect gross margin expansion to largely peak for the company in the current quarter. Standalone sales in Q4FY23 are seen at Rs 4,336 crore, up 2.1 per cent QoQ with Ebitda margins at 14.5 per cent (up 160 bps QoQ). The brokerage firm expects the company to benefit from 20 per cent plus volume growth in the domestic CV space (Q4FY23).