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Shares of tyre companies such as Apollo Tyres, Ceat, MRF, Balkrishna Industries and JK Tyre & Industries rode high after news that anti-dumping duties are likely to be imposed on truck and bus radials (TBR) from China.
DG’s recommendationThe Apollo Tyres stock gained 9 per cent and hit a high of ₹288.45, while others gained 2 to 4 per cent.
The Directorate-General of Anti-dumping & Allied Duties has recommended the imposition of an anti-dumping duty (ADD) of $245-452 a tonne on truck and bus radial tyres imported/produced from China.
An agency report said that India may impose an anti-dumping duty of up to $452.33 a tonne. This, along with GST, will eliminate the price differential between Indian-made and Chinese TBR tyres, analysts said. ICICI Securities believes that the combination of ADD and GST could lead to reduced imports of Chinese tyres (which currently account for 25-30 per cent of domestic replacement TBR demand) and could boost volumes for the domestic players.
According to analysts, Apollo Tyres is likely to benefit the most, followed by JK Tyre. Apollo Tyres recently doubled its Chennai TBR capacity to 12,000 tyres/day. JK Tyre increased its TBR capacity by 50 per cent via the Cavendish acquisition. Ceat has announced a near-doubling of its TBR capacity.
Improved show likelyThe anti-dumping news is likely to offset the tepid financial performance reported by most of the companies in June 2017, when sales growth was muted due to de-stocking ahead of GST, and margins took a big hit on account of a jump in natural rubber prices (30 per cent in Q1).
However, the anti-dumping duty benefits, the upcoming festive season and falling rubber prices will likely revive the tyre companies’ financial performance. JM Financial pointed out that natural rubber prices have corrected by 20 per cent. Motilal Oswal expects them to soften further, thereby aiding the margins of tyre companies.
Tyre companies’ share prices are likely to gain further momentum despite huge gains of 78-132 per cent in the past year.
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