Dolly Khanna Portfolio: The shares of Tinna Rubber and Infrastructure Ltd opened at a 5 per cent upper circuit at ₹ 633.70 apiece on Friday. They were locked at a 5 per cent upper circuit on Thursday as well. 

Tyre stocks have vroomed and are in the limelight. The sector’s improved pricing power is said to be the main driver of excitement around the stocks. In fact, the shares of Apollo Tyres Ltd and Ceat Ltd rose to their 52-week highs this week on the NSE. 

Tyre makers are relieved due to the easing prices of raw materials, including natural rubber, carbon black, and other crude-based derivatives. In addition, the prices of natural and synthetic rubber have also come off their recent peaks, while Brent crude oil prices have declined. These components form a substantial portion of the sector’s overall input costs. 

Dolly Khanna’s stake 

Tina Rubber & Infrastructure Ltd is engaged in the conversion of end-of-life tyres (ELT) into crumb rubber and steel wires obtained in the process. 

Ace Investor Dolly Khanna holds a 1.8 per cent stake in the company as per the data available for the June quarter. In other words, she has 1,56,861 shares in the company worth 9.9 crores. She had a 1.6 per cent stake in the company in the March quarter. This implies that she has increased her stake by 0.2 per cent. 

Multibagger returns 

As per year-to-date data, the share price of the company has increased from ₹ 183.40 apiece to ₹ 633.70, giving multibagger returns of 245.53 per cent. Therefore, if an investor would have invested ₹ 1,00,000 in the shares of the company at the beginning of this year, the value of their holdings would have been ₹ 3,45,530 today! 

What are analysts saying? 

“Earlier, there used to be under-cutting of prices by leaders in each tyre category and the price trend was set by the leader. But, in the last year or so, we have seen significant price action by all listed companies,” said Varun Baxi, an analyst at Nirmal Bang Institutional Equities. 

Baxi added that this is good for the margin outlook and that double-digit margin growth will lead to multiple re-rating for tyre stocks. 

Analysts say that the gross margins of tyre companies have been under severe pressure in recent quarters. Companies have taken a series of price increases in order to contain further margin erosion. However, margins should start improving gradually, given the lag effect in

passing on the burden of elevated input costs. The ability of tyre makers to keep raising prices has boosted investors’ confidence. 

Mitul Shah, head of research at Reliance Securities said that the demand outlook for the sector is expected to be robust. Further, the volumes are likely to get a boost in FY23 from recovery in the domestic original equipment manufacturers (OEMs) and the replacement segments. In addition, the easing of the semiconductor shortage should lead to an improvement in OEM sales and a revival of replacement demand for tyre companies in H2FY23. 

Increase in Price 

Tyre prices across product categories are likely to see additional hikes of 1.5-2.5 percent in September, indicate dealer channel checks by some broking firms. Tyre companies have already taken around 3 percent price hikes in July as well as August, according to analysts. 

Written by Simran Bafna


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