Top 5 Tyre Companies in India by Growth

The Indian tyre industry saw two muted years during the pandemic. As automobile demand increased, the industry experienced a resurgence.

Several factors contributed to the growth (domestic and export), such as higher domestic demand, the government's infrastructure push, faster recovery from the pandemic by the European and North American markets, anti-dumping duties against Chinese products, and China plus one strategy.

Indian tyre manufacturers, as a result, are investing heavily in capex to drive the growth further.

In the last three years, the entire industry combined has invested close to Rs 350 billion (bn) towards capex for expanding capacities and debottlenecking.

This will translate to a turnover of Rs 1,000 bn in the next three years. The current industry turnover is Rs 750 bn.

Now, one important thing you need to know is the concept of sector rotation or investing in sectors which are in favour. Once the market notices the high growth potential of companies, it's like a cakewalk to pick stocks from the sector.

Considering this, we have shortlisted five tyre companies that rank the highest in terms of revenue and profit growth. These stocks are filtered using the Equitymaster stock screener.

As and when the tyre sector goes gains momentum like the case of defence stocks now, these five companies could take the lead.

Take a look...

#1 Balkrishna Industries

First on the list is Balkrishna Industries, a global leader in the off-highway tire industry.

The company is engaged in manufacturing performance-focused tyres for the agricultural, construction, earthmoving, port, gardening, and mining industries.

It sells its tyres across the globe covering over 160 countries with an extensive distribution network in India, Europe, America, and the rest of the world.

The company's client base includes reputed names such as John Deere, New Holland, JCB, CAT, and Turk Traktor.

It has five manufacturing facilities in India with a production capacity of 285 thousand metric tonnes per annum (MTPA).

Currently, the company is in the process of expanding its manufacturing facility through a brownfield project in Waluj, Maharashtra. With this expansion, the company targets an increase in market share by 10% in the next four to five years.

Balkrishna Industries has over 3,200 stock keeping units (SKU) in its product portfolio; it plans to increase this by adding large-size tyres and strengthening its customer base.

Apart from this, the company plans to expand its reach by strengthening its distribution channels and increasing its footprint in the replacement segment.

It also plans to increase its share of business in the USA by increasing the supply from India.

For all this, the company plans to spend Rs 6 bn approximately, of which routine maintenance capex will be Rs 3 bn.

The company's growth plans over the years have supported its financial performance.

In the last five years, the revenue has grown at a compound annual growth rate (CAGR) of 13.2%, driven by strong volume growth. The net profit has grown at a CAGR of 6.9% during the same time.

The latest return on equity (RoE) and return on capital employed (RoCE) stand at 20.7% and 26.8%, respectively.

Despite investing heavily, the company's debt-to-equity ratio stands low at 0.1x. It plans to become a debt-free company in the next 15 to 18 months.

The company also pays dividends consistently and has a five-year average dividend payout of 30.9% and a five-year average dividend yield of 1.2%.

Balkrishna Industries Financial Snapshot (2018-22

Particulars (Rs m)	FY18	FY19	FY20	FY21	FY22
Total Revenue	47,664	54,282	51,792	59,554	87,330
Growth		13.90%	-4.60%	15.00%	46.60%
Operating Profit	11,025	13,034	11,559	18,108	20,090
Operating Profit Margin	24.90%	25.00%	24.00%	31.30%	24.20%
Net Profit	7,358	7,737	9,597	11,775	14,354
Net Profit Margin	16.60%	14.80%	19.90%	20.40%	17.30%

Data source: Equitymaster

Going forward, its growth plans, along with the growing demand for off-highway vehicles, will drive growth in the medium term.

To know more, checkout Balkrishna Industries' financial factsheet and latest quarterly results.

#2 MRF

Second on the list is MRF, a market leader in the domestic tyre industry.

The company manufactures tyres and has an established presence in all sub-segments, including two-wheeler, trucks and buses, passenger cars and jeeps, small commercial vehicles (SCVs) and light commercial vehicles (LCVs), farm, off-the-road (OTR) and aviation.

It also manufactures sports goods, paints and coats, retreads, puzzles, games, and toys for kids through its brand Funskool.

MRF is one of the largest tyre manufacturing companies in the country, with about 29% of the industry share.

The company has ten manufacturing facilities in India, producing over 74.5 million (m) tyres and 47.6 m tubes.

It also has a well-established distribution network of more than 5,000 dealers and distributors across the country.

MRF also exports to several countries, including Bangladesh, the Philippines, Indonesia, the African continent, and the Middle East.

The company has a wide product portfolio and plans to expand it further through new product launches.

In FY23, it launched tyres across all vehicle categories and plans to continue doing so in the future as well.

MRF also plans to increase its exports by tapping new markets. It plans to invest around Rs 10-15 bn for this purpose, which it plans to fund entirely through internal accruals.

Coming to its financial performance, the company's revenue has grown at a CAGR of 11.7%, driven by growth in volumes.

Although the net profit fell in the financial year 2022 due to rising prices of raw materials and unstable economic conditions, it grew by 22% in the financial year 2023.

The company's debt-to-equity ratio is 0.1x. It also pays consistent dividends to shareholders, but the tiny peanuts in form of dividends don't matter much when the stocks trades above Rs 100,000 per share.

MRF Financial Snapshot (2018-22)

Particulars (Rs m)	FY18	FY19	FY20	FY21	FY22
Total Revenue	1,48,744	1,64,842	1,65,747	1,63,731	1,96,337
Growth		10.80%	0.50%	-1.20%	19.90%
Operating Profit	22,875	23,115	23,820	29,493	20,588
Operating Profit Margin	15.70%	14.40%	14.70%	18.20%	10.70%
Net Profit	11,316	11,306	14,226	12,771	6,692
Net Profit Margin	7.80%	7.00%	8.80%	7.90%	3.50%

Data source: Equitymaster

Going forward, new product launches and expansion into new markets will drive its revenue and profit growth in the medium term.

Recently the company's share price touched Rs 1,00,000 and become India's most expensive stock.

To know more, checkout MRF's financial factsheet and latest quarterly results.

#3 JK Tyre & Industries

Third on the list is JK Tyre and Industries.

The company is one of the leading tyre manufacturers in India. It manufactures types for all vehicle segments, including trucks, passenger vehicles, tractors, and multi-utility vehicles. It holds leadership in manufacturing tyres for trucks and bus radials.

It has several reputed companies as its clients, such as Maruti, Hyundai, Volvo, Ashok Leyland, Eicher, Bajaj, and Escorts.

The company has a robust distribution network of over 6,000 dealers, 500 distributors, and 140 sales offices in India.

It also has a robust distribution network in Mexico, Middle East & South East Asia, Africa, and Latin and North America and operates in over 100 countries.

JK Tyre & Industries has 12 state-of-the-art manufacturing facilities with an annual production capacity of 33 m tyres, where it produces over 450 SKUs.

The company also has strong research and development (R&D) capabilities which help it launch new products. It was the first to launch high-performance H, V, and Z-rated passenger radial tyres.

It also launched a complete range of EV-specific smart radial tyres for all vehicle categories.

The company also acquired a small tyre technology startup and became the first company to launch a tyre pressure monitoring system (TPMS) based on sensor technology.

JK Tyres & Industries has a growth strategy which will help the company increase its market share, revenue, and profit. As a part of this plan, it aims to strengthen its market position by expanding its distribution channel and increasing volumes across all vehicle categories.

The company plans to increase its exports by launching its eco-range products internationally and capture market share in key markets such as Europe, Australia, and South Africa.

JK Tyres also plan to spend Rs 10 bn on capex for expanding its truck bus radial and passenger vehicles radial capacity.

Coming to its financial performance, in the last five years, the company's revenue and net profit have grown at a CAGR of 7% and 8.3%, respectively. The primary reason behind this growth is the high demand from original equipment manufacturers (OEMs).

The company's net debt to equity stood at 1.2x, and the company plans to deleverage its balance sheet in the next two years.

It also pays consistent divined to its shareholders with a five-year average dividend payout ratio of 17% and a five-year average dividend yield of 1.3%.

JK Tyre & Industries Financial Snapshot (2018-22)

Particulars (Rs m)	FY18	FY19	FY20	FY21	FY22
Total Revenue	84,182	1,04,520	87,533	91,453	1,20,195
Growth		24.20%	-16.30%	4.50%	31.40%
Operating Profit	7,257	10,230	8,795	13,438	10,769
Operating Profit Margin	8.80%	9.90%	10.10%	14.80%	9.00%
Net Profit	629	1,763	1,490	3,334	2,003
Net Profit Margin	0.80%	1.70%	1.70%	3.70%	1.70%

Data source: Equitymaster

Going forward, growing demand for EVs and companies' expansion in new markets will drive its revenue and net profit.

To know more, checkout JK Tyre and Industries financial factsheet & latest quarterly results.

#4 Ceat

Next on the list is Ceat, one of the largest and fastest-growing tyre manufacturers in India.

The company manufactures tyres majorly for trucks and buses. It also manufactures tyres for two and three-wheelers, passenger cars, farm equipment, and light commercial vehicles.

It has a strong domestic presence with a network of over 300 distributors, 3,400 dealers, and 35,000 sub-dealers.

The company also operates over 300 exclusive outlets and has a presence in over 400 multi-brand outlets.

It has long-term partnerships with major OEMs such as Tata Motors, Ashok Leyland, Escorts, Mahindra, Honda, Royal Enfield, Bajaj, and Piaggio.

Ceat has seven state-of-the-art manufacturing facilities with a capacity to manufacture 350 m tyres per annum.

The company has a wide product portfolio with over 1,900 SKUs, and during the year, it launched 170 new products.

Ceat plans to continuously innovate and launch new products in the next few years as well. It is currently building a greenfield plant in Chennai to build passenger car radial tyres and truck bus radials.

The company is also investing in a brownfield plant to expand its capacity in the Nagpur plant. After the expansion, the Nagpur plant can manufacture 270 m tyres per annum.

It is also undertaking a de-bottlenecking activity, end-of-the-line automation and the development of sustainable energy sources with a capex of Rs 2.5 bn.

Through this, the company plans to reduce the overall cost of producing tyres.

In the last three years, the company's revenue has grown at a CAGR of 14% on account of volume growth. It reported a net profit of Rs 1.8 bn at the end of the financial year 2023, a growth of 158% from the previous year primarily due to operational efficiencies and the low cost of raw materials.

The RoE and RoCE currently stand at 5.3% and 10.2%, respectively. Despite incurring a high capex, its debt to equity is 0.4x.

Ceat Financial Snapshot (2019-23)

Particulars (Rs m)	FY18	FY19	FY20	FY21	FY22
Total Revenue	70,248	68,015	76,477	93,786	1,13,337
Growth		-3.20%	12.40%	22.60%	20.80%
Operating Profit	6,013	6,948	9,279	7,219	9,467
Operating Profit Margin	8.60%	10.20%	12.20%	7.70%	8.40%
Net Profit	2,309	2,128	3,960	706	1,824
Net Profit Margin	3.30%	3.10%	5.20%	0.80%	1.60%

Data source: Equitymaster

Going forward, the strong financials and its expansion plans will drive revenue and net profit growth.

To know more, checkout CEAT's financial factsheet and latest quarterly results.

#5 Apollo Tyres

Last on the list is Apollo Tyres.

Established in 1972, the company manufactures automatic bias and radial tyres and tubes catering to OEMs and replacement demand.

The company's products are used by two-wheelers, trucks and buses, light trucks, passenger cars, and farm vehicles.

There are two brands under which the company sells its products, namely Apollo and Vredestein, a Netherlands-based brand which Apollo acquired in 2009.

At present, Apollo Tyres sells its products in over 100 countries covering Asia Pacific, USA, Europe, Middle East, and African regions.

The company has seven manufacturing units, of which five are in India and the rest two are in Europe, with a total manufacturing capacity of producing 73 m tyres per annum.

It also has a strong distribution network with over 6,700 dealers in India and 7,000 dealers in Europe.

In the last three years, the company's revenue has grown at a CAGR of 11.9%, driven by growth across key markets. The net profit also grew by a CAGR of 46.6% on the back of tight cost control measures taken by the company.

As a result, its net profit margin has also improved from 3% to 4.5%. The company is focussing on deleveraging its balance sheet by repaying its debt. The net debt came down to Rs 43 bn from Rs 47 bn a year ago.

Apollo Tyres also pays consistent dividends to its shareholders. In the last five years, the average dividend payout and dividend yield stood at 36.5% and 1.6%, respectively.

Apollo Tyres Financial Snapshot (2018-22)

Particulars (Rs m)	FY18	FY19	FY20	FY21	FY22
Total Revenue	1,47,022	1,76,720	1,63,739	1,75,264	2,10,711
Growth		20.20%	-7.30%	7.00%	20.20%
Operating Profit	16,680	17,763	19,581	22,098	25,889
Operating Profit Margin	11.40%	10.10%	12.00%	12.70%	12.40%
Net Profit	7,239	6,798	4,764	3,502	6,385
Net Profit Margin	5.00%	3.90%	2.90%	2.00%	3.00%

Data source: Equitymaster

The company doesn't want to invest heavily in capex to expanding capacity. Instead, its main focus for the next few years is to enhance productivity through de-bottlenecking of its plants.

For this, it plans to invest in digitisation, AI, and machine learning and free up capacities in passenger car radials and tuck bus radials.

This will result in enhanced production, which will offer revenue stability. The profit margins are also expected to go up due to falling input prices and cost-control measures taken by the company.

Going forward, India's GDP growth, high infrastructure spending, and new launches of passenger and commercial vehicles will drive the company's growth.

To know more, checkout Apollo Tyres financial factsheet and latest quarterly results.

Why should you include tyre companies in your portfolio?

The Indian tyre industry manufactured 177.16 m units in 2022, and this number is expected to go up to 263.3 m units in 2028, a 6.7% CAGR during 2023-28.

The export share is also growing, and India's global market share is expected to reach 6% by 2030 from the current 3%.

This is primarily due to competitive costs, high-quality products, and favourable regulations in India.

To add to this, the government's massive Product Linked Incentive (PLI) boost towards the automotive sector and the global trend of China plus one also work in favour of the industry.

Safe to say that prospects for the Indian tyre industry look bright.

It is important to note that tyre companies are highly susceptible to raw material prices.

Volatile prices of raw materials can affect the margins. To add to this, the profit margins of tyre companies are very low, and the demand for their products is subject to the demand for automobiles.

That is why, investing in tyre companies must be done with great caution. Do your due diligence, check the fundamentals of these companies and invest in them only if they are fundamentally strong.

Happy investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...