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View on Tyre stocks/sector on 06 September 2022 By Vinod Nair, Head of Research at Geojit Financial Services.

"The sector was trailing under pressure for a long, due to subdued demand in the auto sector and high input cost. However, the situation is likely to improve going forward, due to a sleep fall in the crude price and easing the semi-conductor issue at OEM levels. During H1FY23, growth in the PV and CV is robust in the domestic industry, followed by PV space in the European region. Meanwhile, APL’s (Apollo tyre’s) 43% & 35% revenue comes from Truck/Bus and PV segment and holds 31% domestic market share in TBR tyres. To offset the margin pressure, During Q1FY23, APL took an 8% and 9% price hike in India and European operations and a further 3-4% hike is expected in Q2FY23. As a result, the company registered an earnings growth of 68% QoQ. We believe the Key triggers are CV cyclical upswing, high radicalization levels, an uptick in PV space and network expansion to be a major top-line driver for the company in a medium to long-term basis. In addition, benign commodity price along with operational efficiency to result in margin expansion for FY24 estimates"

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