 "tyre makers, tyre industry")
Shares of tyre manufacturers have outperformed broader equity benchmarks, buoyed by multiple tailwinds. Softer raw material prices, an uptick in demand from automakers following the reduction of the goods and services tax (GST) rates, and steady replacement demand have lifted sentiment toward the sector.
The average return of the four leading listed players — MRF, JK Tyre, Ceat and Apollo Tyres — stood at 18 per cent over the past six months, compared with low single-digit gains for benchmark indices.
Margin expansion, driven by declining input costs, has been a key catalyst behind the rally, with early signs evident in the September-quarter results. Operating profit margins of major Indian tyre makers rose by 130-240 basis points sequentially, while year-on-year gains ranged from 56 to 322 basis points. Average margin expansion for the four companies was about 190 basis points. Raw material costs as a proportion of sales declined, while operating margins in the September quarter were the strongest in at least five quarters.
The improvement seen in the second quarter is expected to extend into the December quarter. Natural rubber prices (RSS4-Kottayam) have fallen about 10 per cent since the beginning of September, while crude oil prices are down more than 13 per cent over the same period. Besides natural rubber, crude derivatives, including synthetic rubber, nylon tyre cord and carbon black, are key inputs for tyre manufacturing and are also expected to see price declines. Another supportive factor is stronger demand from automakers amid rising volumes and an improving outlook across segments. The auto sector delivered a robust performance in November 2025, spanning passenger vehicles, two-wheelers, commercial vehicles and tractors. Most major automakers reported double-digit year-on-year growth, supported by festival demand and spillover into November. Higher sales were driven by improved affordability following price cuts, positive rural sentiment and sustained export momentum.
Domestic gains were led by medium and heavy commercial vehicles and tractors, with volume growth of 31.3 per cent and 29 per cent, respectively, year-on-year. Light commercial vehicles, two-wheelers and passenger vehicles also posted strong growth in the range of 18 to 23 per cent.
Against this backdrop, most brokerages maintain a constructive view on the sector’s listed majors. Analysts led by Mumuksh Mandlesha of Anand Rathi Research expect MRF to post 9 per cent revenue growth, 13 per cent growth in operating profit and 19 per cent growth in net profit over FY25-28, supported by a favourable outlook for replacement demand, exports and market share gains. Gross margin improvement is expected to be driven by lower rubber prices, softer crude derivatives and better realisations from an improved product mix. The brokerage has a buy rating on the stock with a target price of ₹1,70,000 a share.
At Nirmal Bang Research, CEAT remains the preferred structural play in the tyre sector. The brokerage cites the company’s leadership in two-wheelers, expanding presence in premium segments such as sports utility vehicles and 150cc-plus motorcycles, and a growing global footprint following the Camso acquisition. According to analysts Yash Agrawal and Prateek Ladha, favourable GST reforms, rising electric vehicle adoption and ongoing premiumisation trends are expected to support healthy single-digit growth in India’s tyre market over the near term. The stock carries a buy rating with a target price of ₹4,545.
ICICI Direct Research has a buy rating on Apollo Tyres, pointing to GST 2.0 reforms that are expected to meaningfully lift auto volumes over the near to medium term, alongside a recovery in margins. Analysts Shashank Kanodia and Bhavish Doshi are also positive on the company’s healthy cash flow generation, calibrated capital expenditure, ongoing debt reduction and double-digit return ratios. The brokerage has set a target price of ₹565.
Geojit Research expects the Indian tyre industry to grow 7-8 per cent in FY26, driven by strong domestic replacement demand. It highlights market penetration initiatives, digitalisation efforts and a focus on improving operational efficiencies as key long-term growth drivers for JK Tyre & Industries. However, the brokerage cautions that global uncertainties stemming from US tariffs and ongoing geopolitical tensions continue to pose challenges. It maintains a hold rating on the stock with a target price of ₹391.
