Tyre stocks face selling pressure on lower FY25 volume growth forecast; MRF, Apollo Tyres, CEAT down 3-4%
ICRA, India's domestic tyre volume growth is expected to moderate to 4-6 per cent in FY2025 from an estimated 6-8 per cent in FY2024 on the back of elevated base and subdued growth in the commercial vehicle (CV) segment. ICRA anticipates domestic demand from original equipment manufacturers (OEMs) in certain consumer segments like passenger vehicles (PV) and two-wheeler as well as replacement to remain healthy, supporting overall tyre volume expansion in FY2025. While revenues would expand by 5-7 per cent in FY2025, high natural rubber prices and increasing crude prices are likely to moderate the tyre industry’s margins by 200-300 basis points (bps) in FY2025.
The industry’s operating margins is estimated to have expanded to 15-17 per cent in FY2024, primarily on the back of softening in prices of key raw materials such as rubber, and crude derivates, including synthetic rubber, carbon black, and caprolactam for a large part of the year. However, input costs have been on an upward trend since January 2024. International rubber prices have increased by 25-30 per cent in the past four months, trading currently at ~Rs.
185-186 per kg owing to global supply shortage amid adverse weather conditions in key rubber-producing nations in South-east Asia. Given India’s reliance on imported natural rubber, domestic rubber prices have also increased significantly in the past few months, trading at ~Rs. 180 per kg.
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