Margins of tyre companies like MRF, Ceat close to their peak: Parag Thakkar, HDFC Securities

In an interview with ET Now, Parag Thakkar, HDFC Securities, shares his views on tyre stocks. Excerpts:

ET Now: Is this a peak for tyre stocks because this is probably the best that they can clock in in terms of EBITDA margins or do you believe that this is sustainable and therefore these stocks warrant a fresh investment to look at?

Parag Thakkar: Management keeps on guiding that this is not the margin which they feel that they could have achieved and which will sustain.

ET Now: For all of them – MRF, Ceat, all of them...?

Parag Thakkar: Yes, for all of them, plus in MRF especially and then Ceat and TVS Srichakra. All these two wheeler tyre companies have a limited competition from Chinese import, otherwise truck replacement tyres, which is around 70% of the large tyre companies business have competition from Chinese imports and which all of these tyre companies have also highlighted.

So, in my view, margins are close to their peak but it all depends on raw material prices again. Raw material prices are still correcting, you never know you might have one or two quarters of better margins because raw material prices just continue to correct.