Tyre stocks in focus; Balkrishna Ind at record high, Apollo Tyres jumps 5%

Balkrishna Industries hit a new high of Rs 2,656.95, up 5 per cent on the BSE in intra-day trade, surpassing its previous high of Rs 2,558.15 touched on August 4, 2021

Shares of tyre companies were in focus in Wednesday's session, with most of the frontline stocks trading higher by up to 5 per cent on the expectation of improvement in demand. Among individual stocks, Apollo Tyres, Balrishna Industries, JK Tyre, MRF and Ceat were up between 3 per cent and 5 per cent on the BSE. In comparison, the S&P BSE Sensex was up 0.18 per cent at 59,111 points at 10:38 am.

Balkrishna Industries hit a new high of Rs 2,656.95, up 5 per cent on the BSE in intra-day trade. The stock surpassed its previous high of Rs 2,558.15 touched on August 4, 2021. In the past one month, it has rallied 18 per cent, as compared to a 6.8 per cent rise in the benchmark index. In the past six months, it has zoomed 62 per cent as against a 19 per cent gain in the Sensex.

The company witnessed strong demand tailwinds across geographies and segments as sales volume numbers have clocked 68,608 MT for the April-June quarter (Q1FY22), which is the highest quarterly sales volume.

Last week, the company announced that it has commenced the trial production at Green Field Project located at F-20 - Waluj, Aurangabad, Maharashtra with an installed capacity of 30,000 MT per annum along with a warehousing facility for raw materials and finished goods. The planned small co-generation plant has not been installed, the company said.

The diversified product portfolio, strong presence across the globe, multiple sourcing bases of raw materials and strong balance sheet with no long-term debt make Balkrishna Industries Ltd. (BKT) resilient to face any challenges and to maintain a competitive edge in the global market, an analyst at KRChoksey Shares and Securities said in the result update. “Q1FY22 result was characterised by good demand amidst challenging environment on account of robust growth in the agriculture segment. Improvement in demand led by resolution of protectionism measures and US-China trade war has led to improved demand across geographies. Benefits are also expected to flow from multiple capex expansions from FY22E onwards,” the brokerage firm said.

As regards Apollo Tyres, analysts at JM Financial Institutional Equities said though the near-term margin is expected to remain muted, we expect margin recovery to be sustainable by Q4 owing to the company’s ability to take gradual price hikes (6-9 per cent price hike in last 7 months and plans 3-4 per cent in Q2).