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Monday, May 23, 2022

Tyre stocks slip on hike in customs duty; outlook positive

MUMBAI: Shares of major tyre companies were down on profit-booking on reports that the government has hiked customs duty on imported rubber.

According to media reports, the customs duty will now be at 20 per cent or Rs 30 per kg, whichever is lower as against Rs 20/kg or 20% whichever is lower, earlier. This has led to spike in the domestic rubber prices.

Tyre companies have been on a roll on the back of sharp decline in international rubber prices, which constitute about 55 per cent of the raw material inputs. This has resulted in healthy margins for these companies.

“While the increase in the specific rate of import duty will pressurize the margins of domestic tyre manufacturers like, MRF, Apollo Tyres, JK Tyre & Industries and Ceat; we believe that the impact will be minimum given that the companies imports natural rubber through the advance license route against exports, allowing them to import at zero duty,” said Angel Broking note.

“Exports currently form 10-20 per cent of the total sales for the domestic companies. We would seek more clarity from the management on this front; until then we broadly maintain our estimates for our coverage stocks,” the report added.

According to Pankaj Pandey, Head Research, ICICIdirect.com the rubber prices have cracked nearly 40 per cent because of which the margin profile has improved for all the players.

“From about mid single digits, the margins have gone up to about 12 per cent for both Apollo and JK Tyres. So we believe that the tyre segment will continue to benefit from this change,” he said in an interview to ET Now.

“Hence, it is now in decent double digits, which is why we believe that this particular segment will continue to do well till we do not see much of a reversal in the rubber prices,” Pandey added.

At 10:50 a.m.; MRF was at Rs 19,770, down 0.52 per cent, on the BSE. It touched a high of Rs 19,850 and a low of Rs 19,631.60 in trade today.

Ceat was at Rs 306.65, up 1.29 per cent, on the BSE. It touched a high of Rs 308.65 and a low of Rs 288.20 in trade today.

Apollo Tyres was at Rs 94.70, down 2.32 per cent, on the BSE. It touched a high of Rs 95 and a low of Rs 91.60 in trade today.

JK Tyre Industries was at 153.55, down 1.89 per cent, on the BSE. It touched a high of Rs 153.90 and a low of Rs 147.95 in trade today.

Source: India Times

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