By Sharad P Matade
Stocks of Indian tyre companies performed below the trends on the bourses during the period from December 17, 2018 to February 22, 2019. The BSE Sensex had a flat growth during the period, while most of tyre companies’ stocks reported a negative growth.
In December 2018, the global equity markets were hit by a series of worries. The US-China trade war, rising borrowing costs and bond yields, as well as concerns over global slowdown dampened the domestic equity markets’ sentiments.
Domestic investors also got cautious on the chances of widening fiscal deficit due the government’s stimulus package ahead of the general elections. In the month, the stock markets were also impacted by the resignation of the Governor of the Reserve Bank of India and state election results in which the ruling BJP lost.
Despite volatility, the BSE Sensex touched the 38,000-mark in December. At the end of 2018, the BSE Sensex delivered positive returns of 6.27% to settle at 36,068.33. On the institutional side, Foreign Institutional Investors (FIIs) sold Rs 335.53 billion worth of equities during the year 2018 while domestic Mutual Fund houses continued their buying spree with net purchases of Rs 1,148.68.39 billion in 2018.
In January 2019, the market took the wait and watch approach ahead of the general election. On global front as well, the Federal Reserve kept the rates unchanged on the expectation of resumption of the US-China trade talks. In the month of January, the BSE Sensex was up by 0.5%. On the sectoral front, IT, consumer durables and teck stocks gained 8.3%, 5.2% and 6.4% respectively, while cap goods, auto and metal had a loss of -5.8%, -11.2% and -7.4% respectively. Foreign Portfolio Investors (FPIs) withdrew over Rs 53.00 billion from the Indian capital markets in January.
For the period of December 17, 2018 to February 22, 2019, stocks of Apollo Tyres witnessed a double-digit dip. From the start of the period to the first week of February, the company’s stocks fell steadily due to overall trends on the bourses and moved flat for two weeks. A spike was seen at the end of the period but could not help the company stocks to revive and reported over 10% drop.
Apollo’s net profit for the third quarter ended December 31,2018 fell by 19% to Rs 1.98 billion due to the increase in raw material prices. The company had reported net profit of Rs 2.45 billion for the third quarter of last fiscal. Sales for the quarter increased by 16% to Rs46.55 billion against Rs40.16 billion in in the corresponding period of last financial year. For the first nine months of this financial year, sales grew 22.5% to Rs130.97 billion and net profit increased by 26% to Rs 5.96 billion y-o-y.
In the first half of the period of December 17 ,2018 to February 22,2019, MRF’s stocks moved flat on the bourses. However, in the second half the period, the Chennai- based company’s stocks reported a 18% drop on publication of results for the third quarter ended December 31,2018.
MRF reported 18% decline in its standalone net profit at Rs 2.79 billion for the third quarter due to rise in overall expenses. MRF had a net profit of Rs 3.41 billion for the corresponding period in 2017-18. However, sales increased to Rs 40.34 billion for the quarter as compared with Rs 37.99 billion in the year-ago period.
After witnessing a continuous fall in the first eight weeks of the period, Balkrishna Industries Ltd (BKT) saw a surge in its stocks. In the third week of February, BKT’s stocks surged on the bourses and then had a bump before rising again. However, the momentum did not help the stocks of BKT and the company had over 8% drop in the period.
Stocks of JK Tyre & Industries reported a 3.54% drop in the period of December 17, 2018 to February 22, 2019. At the start of the period, the company’s stocks saw a surge for a brief period. After the surge, JK Tyre’s stocks had a steady fall throughout the period. However, at the end of the period, the company’s stocks spiked up.
Unlike its peers, JK Tyre posted over two-fold increase in its consolidated net profit to Rs 268.9 million for the third quarter ended December 31, 2018 as against a net profit of Rs 113.2 million for the same period of 2017-18. The company’s sales increased to Rs 27.31 billion as compared to Rs 21.23 billion in the same period of previous fiscal, JK Tyre stated in a regulatory filing.
Stocks of TVS Srichakra also witnessed a drop of 6% due to overall trends on the bourses. The company’s sales increased by 18.19% to Rs 5.82 billion in the October- December 2018 period from Rs. 4.93 billion in the same period of previous fiscal. However, net profit declined by 23.85% to Rs. 236.0 million in the third quarter of 2018-19 from Rs. 309.9 million in the same period of 2018.
Ceat’s stocks also posted a double-digit fall in the period. The company’s stocks fell throughout the period and reported a 19% drop in the period. Ceat reported a 36% fall in its consolidated net profit to Rs 522.4 million for the quarter ended December 2018. The company had posted a net profit of Rs 821.0 million for the corresponding period of the previous fiscal. Total revenues for the quarter stood at Rs 17.18 billion, against Rs 15.81 billion for the same period a year ago.
Stocks of Goodyear India and PTL Enterprises also reported negative growth in the period.