Tyre shares gain on CLSA's positive stance on tyre companies

Shares of tyre manufacturers surged on Friday, April 11, after CLSA, Asia’s leading capital markets and investment firms, released a report on the tyre sector. CLSA's positive outlook sparked a rally in tyre stocks including Ceat, MRF, Apollo Tyres, Goodyear India, TVS Srichakra and Balkrishna Industries.

Shares of TVS Sirichakra rose as much as 8.96% to hit an intraday high of ₹2,666 on the BSE. MRF advanced over 3% to hit an intraday high of ₹1,16,732.70, Ceat advanced 3% to ₹2765 and Apollo Tyres advanced 3.8% to ₹423.

CLSA highlighted that the Indian tyre market is undergoing a structural transformation marked by improved profitability and capital efficiency. The investment firm attributed shift to three primary drivers: increased pricing discipline among players, enhancements in product quality and a move toward a more profitable product mix.

A key insight from the report is the expected shift in market composition. While truck and bus tyres (T&B) currently account for 50% of the market, CLSA foresees a gradual transition towards high-margin passenger car radials, fuelled by India's growing passenger car base. This change is likely to lift industry margins and align players with global profitability benchmarks, CLSA noted.

Crucially, CLSA believes the tyre sector is now at the trough of its margin cycle, setting the stage for a rebound. Low prices of raw materials, a significant cost component, are expected to bolster gross margins in the coming quarters. Better operational discipline will also support overall profitability and free cash flows, CLSA said.

The report highlights counter-cyclical feature of the tyre industry. Free cash flows (FCF) tend to be more responsive to margin cycles and capital expenditure trends than to top-line revenue growth. According to CLSA, this makes the sector particularly attractive in the current macro environment, where margin tailwinds and capex moderation are aligning positively.

Looking ahead to FY26–27, CLSA expects improved valuations across the sector, driven by stronger free cash generation, efficient capital allocation, and rising investor confidence.

As of 2:21 pm, all the tyre shares in the market were trading with a positive bias and the NIFTY Auto index rose nearly 2% with all its 15 constituents trading higher.