Tyre Cos Could Post Better Numbers Ahead: Analysts
Manufacturers expect govt to impose anti-dumping duty of 7-12% on Chinese imports
ET Intelligence Group: The projected next-fiscal earnings for JK Tyre, Apollo Tyres, MRF, and Ceat could see an upgrade between 5% and 15% if India imposes anti-dumping duties on truck and bus radial tyres (TBR).
The Directorate General of Antidumping and Allied Duties (DGAD), the watchdog overseeing unfair trade practices, has recommended imposing 7-12% anti-dumping duties on TBR used in the commercial transportation sector. The Ministry of Finance is yet to decide on the recommendations of DGAD. The leaders in the TBR space—JK Tyres and Apollo tyres—together control about 60% of the market. They would be primary beneficiaries of the anti-dumping duty on Chinese TBR tyres. In its investigations, the DGAD found that dumping margins for Chinese firms has been up to 40%, as the landed price of Chinese imports were below the selling price and cost of sales for the domestic industry. At the same time, China’s share of im- ported tyres reached 91% in FY17 compared with 40% three years ago. The shares of Spain, Japan, and Thailand fell. As a result, the prices of Chinese TBR tyres were 20-25% lower than domestic tyre prices. Lower prices helped the Chinese TBR tyres to capture a sizeable share in the domestic replacement market. In the past three years, the volumes of Chinese TBR tyres grew three fold, and their market share reached 30-35% in the replacement market. Hence, the DGAD recommended anti-dumping duty of 7-12% on TBR, which translates into ₹ 1,000-1,800 per tyre. The imposition of the levy is directionally positive for Indian tyre makers. According to a JM Financial note, if imports of Chinese tyres fell 50%, they would translate into 1-3% incremental volume for Apollo, Ceat and JK Tyre for the next fiscal. Also, the absence of Chinese supplies would enhance the pricing power of local manufacturers. Last FY, about 16 million truck tyres were sold in India and the TBR segment has expanded at 5-7% annually in the past few years.