Last 1 year has been very challenging for tyre companies were most of the tyre company remained in negative territory. Jk Tyre fell almost 28.57%, Apollo Tyre 19.7%, MRF 12.39% and Balkrishan Industries fell 7.38%, and however CEAT share price and TVS Shrichakra share price were up by 16.10% and 23.71% respectively.

Rubber price has fallen almost 30.5% in last one year which is a major raw material for tyre industries. MRF raw material cost includes 53% of its total raw material cost in rubber. Therefore, the falling rubber price has a direct benefit for tyre industries.

In the budget for 2016-2017 Finance minister did not impose an anti-dumping duty on the import of bus radial tyres and truck from China or raise the basic custom duty from the existing 10%.

Ceat tyres Operating profit has jumped 25.16% annually from Rs. 550.83 crs to Rs. 689.47 crs for FY15 and FY16 respectively. Net profit jumped by 51% annually from Rs. 298.97 crs to Rs. 452.52 crs.

Apollo tyres operating Profit has jumped by 0.13% annually from Rs. 1542.31 to Rs. 1544.35 in FY15 and FY16 respectively. Net profit jumped by 11.80% annually from Rs. 977.61 to Rs. 1093.02.

Jk tyre operating profit jumped by 22.30% from Rs. 772.99 crs to Rs. 945.39 crs for FY15 to FY16 respectively. Net profit jumped by 39.94% from Rs. 323.89 crs to Rs. 453.28 crs.

If we look at topline growth of all the three companies, they have not shown any significant jump rather sales volume dipped marginally because of which bottom line has surged heavily. Total expenditure has gone down by 5% to 10% for all the tyre companies due to fall in rubber prices.

All the tyre companies has lower down their interest cost JKtyre interst cost fell by 4.65% annually, Ceat by 31.18% annually and Apollo tyre interest cost declined by 50%.

Looking at all these parameters Ceat seems to be a good buying stock for positional investment. Ceat is trading at PE ratio of 8.21 were Industry PE is 12 therefore gives scope to value investors.

Indian Tyre industry

• Tyre Industry turnover in India is over Rs. 50,000 Crores
• Truck & Bus segment for 55% of the industry’s revenue
• India exports Rs. 10,500 crore worth of tyres
• Most of the investments by India and MNC tyre majors are geared towards Trucks & Bus Radial Tyres

Ceat tyre key highlights

• 52 week high of Rs. 1319.90 on 7th Oct 2015 and
• 52 week low is Rs. 595.20 on 9th June 2015.
• Ceat has huge market capitalization of 3662 crs
• Very low debt to equity ratio of 0.37
• FII holds 29.99% in Ceat
• Ceat is No 1 player in Sri lanka in terms of market share
• Ceat has 4000+ dealers, 390+ Ceat Franchisees and 270+ two-wheeler distributors
• The long Term credit rating was enhanced during 2015-16 from A+ to AA- by rating agencies viz. CARE and India Rating (Fitch).

As per Dynamic Levels Ceat has major support at Rs. 845 which is a good buying area and the target is weekly high of Rs. 1056.50.

Ceat is one of the Multibagger Stocks identified by Dynamic Research team at the end of every quarter out of 1700 Shares of NSE.

To get more Support and Resistance levels of the share please visit Ceat Share Price Forecast.