For tyre stocks, best days are past
₹4,000 crore in FY24, compared with about ₹4,500 crore on average in the preceding three fiscal years," Sethi said. Hereon, capex incurred by tyre companies is expected to be used for maintenance and debottlenecking purposes rather than aggressive capacity additions, as capacity utilization is over 75%.
Moreover, balance sheets show a comforting picture. “Gearing - a gauge of debt position, for the sector, is expected to improve to around 0.4 times as on 31 March 2024 from 0.6 times as on 31 March 2023," Sethi added.
Now, the question is whether factors like prudent capex plans and better balance sheets would be adequate for tyre stocks to sustain their valuations, that are currently above historical averages. Perhaps not, if crude rises continuously.
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