An anti-dumping duty on Chinese truck and bus radials could boost earnings of Indian tyre makers as these account for more than half of the industry’s sales. Apollo Tyre Ltd. stands to gain the most.
Apollo Tyre’s earnings per share could jump 17-32 percent in the ongoing and the next financial year, the market research arm of Deutsche Bank said. It has a ‘buy’ rating on Apollo Tyres.
The recommendation of an anti-dumping duty is a material positive for all tyre companies, especially Apollo Tyres which derives close to 45 percent of its consolidated revenues from the Indian truck segment.”Deutsche Bank Research Report
Shares of Indian tyre makers gained up to 5 percent this week after the Director General of Anti-Dumping and Allied Duties recommended an anti-dumping duty on truck radial tyres imported from China, according to its website. Domestic companies have have been facing tough competition from Chinese peers, which price their tyres up to 25 percent lower.
Investigations by the Department of Commerce concluded that the cheap imports has caused “material injury” to the domestic industry. The ministry advocated a $250-450 per metric tonne anti-dumping duty in its report. This would result in an anti-dumping duty rate of 10-12 percent, according to the Deutsche Bank note.
The finance ministry will take the final decision, including the quantum.
Big Boost
The industry gets nearly 55 percent of its revenue from trucks and buses radial tyres, brokerage house Macquarie said. “These companies could potentially see a good margin improvement in the case of an anti-dumping duty is slapped on Chinese tyre leading to an earnings upgrade,” it said.
Impact of Chinese Tyres
Imported truck and bus radials account for 40 percent of replacement demand in India and nearly 92 percent of such imported tyres come from China. Lower pricing due to overcapacity, slower demand in China has to lead to dumping of these tyres in markets like India and the U.S.
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