Best Tyre Stocks in India

Tyre Sector in India

The Indian tyre industry stands as one of the leading global manufacturers, offering a range of products from conventional radial and bias tyres to advanced variants such as smart, puncture-proof, and noise-reduction tyres. The industry is expanding its footprint in premium and luxury tyre segments, previously dominated by imports. With the adoption of new technologies like artificial intelligence and compliance with technical and safety regulations, the Indian tyre industry is improving its operations and becoming more efficient. The market is anticipated to reach 192.3 million units by 2026, exhibiting a CAGR of 3.81% from 2021 to 2026, driven primarily by the growth of the Indian automotive industry and government initiatives promoting electric vehicle usage.

Price Hike to Counter Rising Costs

Effective from July 1, 2024, reports say that domestic tyre companies have undertaken a price hike of 1-2.5% in response to rising raw material prices, particularly natural rubber. This move provides a much-needed cushion for the industry, enabling companies to sustain mid-teens EBITDA margins amidst unprecedented cost increases. Improving demand and ongoing premiumisation have allowed tyre firms to offset rising raw material and EPR-related costs through these price adjustments. The market is absorbing these hikes, indicating sustained margins and a gradual de-linking from raw material prices.

Comparative Analysis of Tyre Stocks

In the fiscal year 2024, MRF reported a notable increase in total revenues, rising to Rs 25,486 crore from Rs 23,261 crore in FY 2023. This growth contributed to a substantial rise in net profit, which jumped to Rs 2,081 crore compared to Rs 769 crore in the previous year. This performance underscores MRF’s strong market position and effective management of operational efficiencies.

Balkrishna Industries (BKT) experienced a slight decline in total revenues, down to Rs 9,368 crore in FY 2024 from Rs 9,759 crore in FY 2023. Despite this, the company saw an improvement in net profit, reaching Rs 1,471 crore, up from Rs 1,057 crore in the previous fiscal year. BKT’s ability to enhance profitability amidst revenue challenges reflects strategic initiatives and effective cost management.

Apollo Tyres recorded a marginal increase in total revenues, reaching Rs 25,377 crore in FY 2024 compared to Rs 24,568 crore in FY 2023. This growth was accompanied by a significant rise in net profit, which surged to Rs 1,721 crore from Rs 1,104 crore in the previous year. Apollo Tyres’ performance highlights its resilience in the competitive tyre industry, driven by expanded market presence and robust operational execution.

JK Tyre & Industries reported growth in both total revenues and net profit in FY 2024. Total revenues climbed to Rs 15,001 crore from Rs 14,644 crore in FY 2023, while net profit increased to Rs 811 crore compared to Rs 264 crore in the previous year. This improvement reflects JK Tyre’s effective sales strategies and operational efficiencies amid market challenges.

CEAT demonstrated steady growth with total revenues rising to Rs 11,943 crore in FY 2024, up from Rs 11,314 crore in FY 2023. Net profit also saw a significant increase to Rs 614 crore from Rs 174 crore in the previous fiscal year. CEAT’s performance underscores its strong market position and successful product innovation strategies.

Stock returns over 1 year

Over the past year, JK Tyre & Industries emerged as the top performer among the listed tyre companies in India, boasting an impressive return of 89.38%. Following closely behind, CEAT also delivered a robust performance with a return of 36.93%. Apollo Tyres, another key player in the industry, achieved a commendable return of 37.51%. Balkrishna Industries (BKT) followed suit with a solid return of 35.86% along with MRF posting a respectable return of 29.8%.

Best Tyre Stocks in India in 2024

1. MRF Limited
   

   Headquartered in Chennai, MRF Limited is a prominent tyre manufacturer with diverse product segments, including tyres for heavy-duty trucks, buses, passenger cars, motorsports, and off-road vehicles. The company provides services like tyre changing, repair, maintenance, and wheel alignment. MRF’s extensive reach across retail stores, dealerships, and car manufacturers contributes to its dominant market position.

2. Balkrishna Industries
   

   Balkrishna Industries Limited (BKT) has been a leader in designing and manufacturing high-performance tyres for various sectors like construction, agriculture, and mining. With a strong global presence and a focus on off-the-road tyres, BKT distributes its products worldwide through an extensive network of distributors and partners.

3. Apollo Tyres
   

   Incorporated in 1972, Apollo Tyres Limited is a global tyre manufacturer headquartered in Gurgaon, Haryana. With a presence in over 100 countries, Apollo offers a wide range of tyres under the brands Apollo and Vredestein, catering to passenger vehicles, commercial vehicles, and off-the-road applications.

4. JK Tyre & Industries
   

   JK Tyre & Industries Limited offers a comprehensive range of tyres for passenger cars, commercial vehicles, and off-the-road applications. The company introduced India’s first ‘Smart Tyre’ technology and has a strong global presence with manufacturing facilities in India and Mexico.

5. CEAT
   

   CEAT Limited, a flagship company of the RPG Group, manufactures tyres for a wide range of vehicles, including motorcycles, cars, and trucks. CEAT has a strong distribution network and focuses on producing high-quality products to meet diverse customer needs across different terrains and locations.

Conclusion

The Indian tyre industry showcases a diverse range of companies, each with unique strengths and specialities. MRF’s legacy and brand recognition, BKT’s focus on Off-Highway Tyres, and Apollo Tyres’ global presence present compelling investment opportunities. JK Tyre’s leadership in the truck/bus radial segment and CEAT’s comprehensive portfolio across various vehicle types further add to the sector’s appeal.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.