India’s most expensive stock MRF has risen by nearly 60% over the past 12 months though the rally has remained subdued in 2024 so far. In contrast, Nifty Auto has delivered superior returns at 68% in this period while broader Nifty’s returns stand at 29%.
CEAT, on the other hand, has outperformed Nifty Auto with an impressive 80% return. Its returns in 2024 so far are at 3%.
Balkrishna Industries: Sell | Target: Rs 1,950
MRF: Sell | Target: Rs 90,000
Apollo Tyres: Sell | Target: Rs 375CEAT: Sell | Target: Rs 1,670International and domestic natural rubber prices in the spot market have risen by 22-32% from 2QFY24, driven by persistent supply concerns as leading natural rubber producers, Thailand, Malaysia and Indonesia, grapple with lower output hit by adverse weather concerns.
Kotak, in a note, said rubber prices may sustain at current levels given the widening global supply deficit and steady demand trends in the global passenger vehicle segment. In the first two months, global natural rubber supply stood at 2.25 million tonnes versus global natural rubber consumption of 2.44 million.
Oil prices are also on the boil amid the Middle East crisis, and the latest attack on Russian energy facilities by Ukraine created more panic as prices shot up on Wednesday.
Crude prices have witnessed an uptick, which will further weigh on profitability, Nuvama said, estimating a 500-600 bps impact on gross margins at current spot prices from 3QFY24 levels. “If the current prices sustain, we see a downside risk to our gross margin assumptions to the tune of 100-200 bps,” the report said.
In March, domestic tyre companies cut prices in the TBR (truck, bus and radial) segment to the tune of 1-1.5%, which implies demand challenges in the CV replacement segment currently.
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