Tyre producers get a grip as raw material prices ease, demand recovers

Tread with caution: Any discount/price cut in the replacement market could offset margin gains

Falling raw material prices and hopes of demand recovery ahead are expected to support the stocks of tyre makers. The listed players have delivered average returns of 48 per cent over the past year, riding on softening raw material costs and steady prices in the replacement market.

Given that crude oil and its derivatives account for about half of the raw material costs for tyre makers, there is a margin cushion for the top players.

Listed tyre players had registered a 141-basis point (bp) quarter-on-quarter improvement in operating profit margin to 19.7 per cent in the July–September quarter on the