TechnoSpeak

SectorCoverage
March16,2012

VIEW:BULLISH

HORIZON:LONGTERM

INDIAN TYRE SECTOR

EQUITYANALYST

AlokDeora|+912240934014
alok.deora@sushilfinance.com
EQUITYANALYST
SaurabhJain|+912240934004
saurabh.jain@sushilfinance.com

Pleaserefertoimportantdisclosuresattheendofthereport

SushilFinancialServicesPrivateLimited
Office:12,HomjiStreet,Fort,Mumbai400001.

ForprivateCirculationOnly.
Member:BSEL,SEBIRegn.No.INB/F010982338|NSEIL,SEBIRegn.No.INB/F230607435.
Phone:+912240936000Fax:+912222665758Email:info@sushilfinance.com

IndianTyreSector

INDEX
ExecutiveSummary

IndustryOverview

Factorsaffectingperformanceoftheindustry

MovementinPricesofKeyRawMaterials
Bargainingpowerofcustomers
OriginalEquipmentManufacturer(OEM)Market
ReplacementMarket
ExportsMarket

TyreRetreading
RadializationOpportunity

CompetitiveScenario

KeyGrowthDriversforTyreSector

LongtermpositiveoutlookforAutoDemand
Recentdeclineinrubberpricestoimproveprofitability
Backwardintegrationcanhelpprotectmargins
Marginsdependonabilitytopassonriseininputcosts

SWOTAnalysis

Outlook

Snapshot

March16,2012

MRFLtd
JKTyres&IndustriesLtd
CeatLtd
ApolloTyresLtd

IndianTyreSector

SmoothRideAheadAnExecutiveSummary

TheIndiantyreindustryhasseenstrongdemandgrowthpostFY2009buthugespikein
NaturalrubberpricesfromCY2011havehadasevereimpactonprofitabilityoftheTyre
Companies.Therewerepricerevisionsseenbytyremanufacturersacrosstheindustrybut
theywerenotenoughtopassonthesteepriseinrubberprices.Howeverwiththerecent
declineinrubberpricesthemediumtolongtermoutlookonthesectorremainspromising.
Few of the factors that would have an impact on demand for tyres in India have been
summarizedbelow.

HealthyAutoDemandtodrivedemandforTyres
AccordingtoSIAM,PassengerVehicle(PV)Salesareexpectedtogrowfrom2.2mnunitsin
2009 to 5.1mn units in 2015implyinga CAGR of 15.0%. Onthe otherhand Commercial
Vehicle(CV)SalesincludingSmallMediumandHeavyCVsareexpectedtogrowfrom0.47
mnunitsin2009to1.42mnunitsin2015implyingCAGRof20.2%.
Autodemandtouchednewpeaksduring2010afterslowdownwitnessedin2009period.
Theeffectofthishugegrowthwillbewitnessedinreplacementmarketincomingperiod.
Replacement markets enjoy higher margins than OEM segment and the increase in
demandfromReplacementwouldmeanhighermargins.

IncreasingshifttowardsRadialization
Indian tyre industry lags far behind other developed countries when it comes to
RadializationinTrucksandBusSegment(T&B).TheIndianmarketsareslowlyconverging
towards radial tyres in CV segment. Tyre Companies are now continuously investing in
radialcapacitywhichislikelytoimproveturnoverandmarginperformanceduetochange
inthesalesmix.

BrandingandAdvertisingplaykeyrole
The leaders in the industry are MRF Tyres, Apollo Tyres, JK Tyres and Ceat Ltd together
commandingover70.0%ofthemarket.Asthereareonlythesefewplayerswhocommand
majorsharesofoverallmarketinIndia,brandingandadvertisingremainsakey.

HugeEntryBarriersandLowMarginbusiness
The entry barriers in this business remain very high owing to high initial investment
required.AlsohighRawmaterialcostscoupledwithhigherworkingcapitalrequirements
andhighcompetitiontendstokeepthe industryprofitabilityundercheckdespitestrong
tyredemand.

RetreadingBusiness
As Companies across tyre industry have raised prices owing to higher input costs, there
could be increase in demand for retreading by customers which could affect demand in
Replacementmarketgoingforward.Retreadingcanbedone23timesdependingontyre
conditions and gives a new life to tyre at almost 25.0% of the new tyre costs. Sharp
increaseinretreadinghasanimpactontyredemandfromreplacementmarkets.

DumpingfromForeignCompanies
IncreasingpenetrationfromforeignplayersparticularlyChineseCompaniesinIndiantyre
markets is likely to impact the profitability of local players. Although Chinese companies
enjoy low market share currently (56%), it can increase going forward on price
competition.

March16,2012

IndianTyreSector

IndustryOverview

The Indian tyre industry accounts for approximately 5.0% of the Global tyre demand
generatingrevenuesofapproximately`30,000crforFY2011.Thegrowthindomestictyre
industry was negatively impacted by the global slowdown in FY 2009. Nevertheless, the
industryexperiencedaremarkablerecoveryinFY2010.Thisgrowthwasprimarilydriven
bystrongrevivalinautomobile demandonthe back of improvementinmacroeconomy
andeasingofinterestrates.

IndianTyreIndustryTurnover

CAGRof22.3%

Source:IndustryReports,SushilFinance

TheIndianTyreIndustryproduced119.2mnunitsoftyres(1.5mntonnes)in201011.On
anaverage,InIndianearly60.0%oftheproductionisforreplacementmarket,followedby
25.0% sold to OEMs directly and the balance is exported. Globally, the OEM segment
constitutes 30.0% of the tyre market, exports 10.0% and the balance from replacement
market.ExportsturnoverforIndiaduring201011stoodat`3,600cr.

SegmentalBreakup(IndustryTurnoverFY11)

Source:IndustryReports,SushilFinance

March16,2012

IndianTyreSector

TheIndianTyreindustryischaracterizedbyitsrawmaterialintensity(Rawmaterialcosts
accountforapproximately70%ofturnover).Thereexistshugecompetitionamongthetop
fewplayerswhodominatethemarketandthatresultsinlowmargins.Theseplayersare
constantly focused on advertising, branding their products and strengthening their
distributionnetworkbyincreasingdealernetworksoastoincreasetheirmarketshare.

IndustrySegmentwiseContribution

Source:ATMA,SushilFinance

TheindustryderivesitsdemandfromtheautomobileIndustry.TheOEMmarketofftakeis
dependent on the new vehicle sales while replacement market demand depends on the
total population of vehicles on road, road conditions, overloading norms for trucks,
averagetyrelifeandprevalenceoftyreretreading.Themajorcategoryoftyresproduced
inthecountryisofTruck&Bustyres(nearly60.0%invalueterms).

RadializationoftyresisstillatextremelylowlevelsinIndia.InthePassengerCarmarket,
Radialization has reached 98.0% but in all the other categories, cross ply tyres are still
preferred.Poorroadconditions,overloadingintrucks,highercostofradialtyresandpoor
awareness of tyre users are the main reasons for the non transition of the domestic
market to radial tyres. However, going ahead Radialization in truck & bus tyres may
increaseduetogovernmentsfocusoninfrastructuredevelopment.

Since last few decades, Indian vehicles have been using Cross Ply (Bias) tyres. In these
tyres, the ply cords run across each other or diagonally to the outer surface of the tyre.
Rayon and nylon tyre cords are used as the reinforcing medium. These tyres can be
retreaded twice during their lifetime and are hence preferred by Indian transport
operatorswhonormallyoverloadtheirtrucks.

Ontheotherhand,Radialtyreshavetheircordsrunningradiallyfrombeadat90degrees
angletotherimoralongtheoutersurfaceofthetyre.Thereinforcingmediumsusedin
thesetyresarepolyester,nylon,fiberglassandsteel.Thesetyresaregenerally20.0%more
expensivethantheBiasTyres.Thetyreshavelongerlifeandaremorefuelefficient.The
poorroadconditionoftheIndianroadshasledtolowerpenetrationofradialtyresinIndia
(nearly10.0%)asagainstglobaltrendofabove60.0%.

March16,2012

IndianTyreSector

TOTALTYREPRODUCTIONININDIA(Unitsin000)
Category
Truck&Bus
PassengerCar
Jeep
L.C.V
TractorFront
TractorRear
TractorTrailer
A.D.V.
Scooter
MotorCycle
Industrial
O.T.R.
Total

200910
14,811
20,047
1,402
5,739
2,386
1,634
903
294
13,558
35,664
538
161
97,137

201011
15,668
26,201
1,500
6,029
2,595
1,777
1,051
311
20,140
43,118
616
191
119,197

%Change
5.8%
30.7%
7.0%
5.1%
8.8%
8.8%
16.4%
5.8%
48.5%
20.9%
14.5%
18.6%
22.7%

Source:ATMA,SushilFinance

FactorsaffectingperformanceofTyreIndustry

MovementinKeyInputPrices(NaturalRubber)
Thetyresectorconsumesapproximately63.0%ofthetotalNaturalRubber(NR)consumed
bythecountry.TheIndianTyreindustryisextremelysensitivetorawmaterialpriceswhich
accounts for major portion of the tyre cost. The key raw materials used in the
manufacturingprocessareasfollows:

IndustryRawMaterialMix

Source:ATMA,SushilFinance

Synthetic Rubber (SR) canbe used as asubstitute for NRoralongwithNR but only toa
limited extent in various industries. Generally NR and SR are used in 80:20 ratios in the
Indiantyreindustry.Thiscanvarydependingontechnicalspecificationsofthetyre.

Theotherkeyrawmaterialsconsumedbythetyreindustryarecrudederivativessuchas
Nylon tyre cord fabric (NTCF), Carbon black and Rubber chemicals. While NTCF provides
strength to the tyre, carbon black enhances the life span of the tyre. With only two
domestic manufacturers for NTCF, India imports more than 50.0% of its requirements.
Additionally,about20%oftherubberchemicalsarealsoimportedbyIndia.

March16,2012

IndianTyreSector

ConsumptionofNaturalRubberbyTyreSector

Source:ATMA,SushilFinance

Tyreindustryimportsrawmaterialsonaccountofthefollowingfactors:
Dutyfreeimportspermittedagainstexportoftyres
Domesticdemandinsufficienttomeetdemandrequirement
TechnicalandCommercialfactors
Accesstomultiplesourcesofsupply

RubberPrices
NaturalRubber(RS4)PriceTrend
CAGRof20.9%(FY04FY11);
Grew65.3%YoYduring201011

Source:RubberBoard,SushilFinance

BesidesNR,almostallthekeyrawmaterialsarecrudederivativesandarehencelinkedto
crudeoilprices.Crudeoilpriceshavespikedupinrecentmonthsduetoongoingpolitical
uncertaintyintheMiddleEastandfrommediumtermperspective,pricesareexpectedto
trendhigheronglobaleconomicrecovery.Inthisbackdrop,pricesofSRandothercrude
derivativesusedinthemanufactureoftyresareexpectedtoremainfirmoverthemedium
term.

March16,2012

IndianTyreSector

InternationalScenario
IndiaistheworldsfourthlargestproducerofNaturalrubberafterThailand,Indonesiaand
Malaysia.

NaturalRubberGlobalProductioninCY10

Source:IndustryReports,SushilFinance

Thailand is the worlds largest producer of natural rubber in the world with 33.0%
production.Indonesiaisthesecondlargestproducercontributingaround30.0%ofthe
worldstotalnaturalrubberproduction.

In the year 200910, India produced 831,000 tonnes of natural rubber. India
contributes9.0%oftheworldnaturalrubberproduction.OtherproducersincludeChina
andVietnam,contributing7.0%and3.0%respectivelytotheworldproduction.

Accordingtoestimates,WorldnaturalRubberproductionisestimatedtobearound11.42
mntonnesfor2012,whileconsumptionisprojectedat11.49mntonnesimplyingasupply
sidedeficitof77,000MT.By2020,theGlobalrubberconsumptionisexpectedtoreach36
mntonneswhileconsumptionisexpectedtobeat16.5mntonnes.

March16,2012

IndianTyreSector

Bargainingpowerofcustomers
TherearethreetypesofcustomersforTyreManufacturers:

OriginalEquipmentManufacturers(OEM's)
The OEM segment enjoys the lowest margins reason being that the OEMs always have
high bargaining power as they buy in bulk from the suppliers. To get a pie of the high
volumebusiness,Tyremanufacturersareforcedtosellatlowermargins.Thebenefitsare
thecommitmentsgivenbytheOEMsintermsofthevolumetheywouldprocurefromthe
tyremanufacturers.

ReplacementMarket(throughdealernetwork)
Replacementsegmentisgenerallyoperatedthroughdealernetworkandcompanyowned
outlets.Thebargainingpowerforthereplacementsegmentismoderateasthebuyersare
not that strong as compared to OEMs. The demand in the replacement market remains
strong due to sharp growth in Auto sector witnessed post 2009. In the replacement
market,Tyremanufacturersarebetterabletopassontheincreaseinpricesascompared
to the OEM segment. This segment therefore commands the highest margins. Tyre
Companies are continuously focusing on replacement market and constantly increasing
dealerandcompanyoutletstoincreasethebusinessfromthishighmarginsegment.

ExportMarket
Exportsegmentgenerallyoperatesatmarginswhichfallbetweenthemarginsachievedin
ReplacementandtheOEMmarkets.Exportbusinessattheindustrylevelcurrentlystands
atnearly10.015.0%oftheindustrywideturnover.ExportsofTyresandTubesarefreely
allowedinIndia.ExportsinitiallycomprisedmainlyofBiasTyres.Howeverwiththeglobal
marketmovingquicklytowardsRadialization,theexportsofRadialtyresisontherise.

IndustryExportRevenues

CAGRof22.3%

Source:ATMA,SushilFinance

March16,2012

IndianTyreSector

TyreRetreading
Increasingtyrepricestopushretreadingbusiness
TheIndiantyreretreadingindustryatpresentisnearly10.0%oftotalturnoveroftheTyre
Industry. The major segments where retreading is used is in CV and Off the Road (OTR)
tyres.MajorityoftheIndianretreadingindustryisfragmentedandwithlargenumberof
unorganized participants. Some tyre manufacturers like MRF, JK tyres and some tyre
companiesoperatingthroughfranchiseroutearetheorganizedplayersinthissegment.

Retreadingincludesreplacingthetreadsandprovidingafreshlifetothetyrewithcostof
nearly25.0%ofanewtyretherebyresultinginhugesavings.AHeavyCommercialVehicle
tyre has the ability to get retreaded 23 times in India. The body of the used tyre must
havedesirablelevelofcharacteristicstoenableretreading.Retreadingcannotbedoneif
thetyrehasalreadybeenoverusedtotheextentthatthefabricisexposedordamaged.

WithtyresbeingoneoftheprimarycostsforCommercialfleetoperators,retreadinghelps
increasethelifeoftyresandreducetheoperatingcostsforthecompanies.Theincreasing
price of tyres owing to higherinput costs fortyre manufacturers is expected to resultin
increased retreading especially in the Indian Medium and Heavy Commercial (M&HCV)
industry. Continuous improvement in roads infrastructure and strict overloading
restrictionsareexpectedtoimprovetyrelifeandalsoincreasenumberoftimestyrecan
be retreaded. Increase in retreading can have an impact on replacement demand for
tyresincomingyears.

TypesofRetreading
Retreadingcanbedonebythefollowingtwoprocesses:
ConventionalProcess(hotcureprocess)Inthisprocessanunvulcanizedrubber
stripisappliedonthebuffedcasingofthetyre.Thisstriptakesthepatternofthe
mouldduringtheprocessofvulcanization.

PrecureProcess(coldcure)Duringthisprocessatreadstrip,wherethepattern
isalreadypressedandprecuredisappliedtothecasing.Itisbondedtothecasing
by means of a thin layer of specially compounded uncured rubber (known as
cushionorbondinggum)whichisvulcanizedbytheapplicationofheat,pressure
andtime.

Currently in India the retreading pattern is divided between the above two processes in
equalratios.

Retreadingisactingasabigthreatforthetyreindustry.MostofthetransportersinIndia
retreadtheirtyrestwiceduringitslifetime,whileafewfleetownersretreadthrice.
RetreadingishighlypopularinSouthernIndiaunlikeintheNorthwherethetransporters
overloadtheirtrucksandbuyinganewtyreisthebestoptionforthem.Thoughretreading
has penetrated the market in significant way, it has not made much of an impact in the
twowheelerandpassengercarsegments.

March16,2012

10

IndianTyreSector

RadializationOpportunity
Therearetwotypesoftyres
Crossply(Bias)tyres
Radialtyres.

Radial tyres were first commercially manufactured by Michelin in the late 1940s and
rapidly gained acceptance in Western Europe, Japan and finally in the USA by the mid
1970s.

RadializationintheIndianpassengercarsegmenthasreachedalmost98.0%.Howeveritis
extremely low in the T&B segment at 910%, compared to a world average of 68.0%.
However the trends in economies like China, with high industry wide Radialization of
75.0%,pointstotheprospectsofincreasedradialpenetrationintheIndianT&Bmarkets.
The radial penetration in China has also been supported by its better quality of road
infrastructure and significant investments made by global tyre majors in building large
capacities.

A radial tyre has a longer life and offers higher fuel efficiency and hence is effectively
cheaperthancrossplytyresoverthelifeofthetyre.Howeverthedemandhasbeenslow
topickupduetofollowingfactors
InitialHighInvestmentrequired
LackofAwarenessamongoperators
PoorRoadInfrastructure
OverloadinginVehicles

CurrentRadializationLevelsinIndia
AlthoughPVsegmenthasachievedalmost
100%Radialization,T&Bsegmentlagsway
belowworldaverageofnearly70.0%
offeringhugeopportunity.

Source:ATMA,SushilFinance

FutureofRadialization

ThefutureofRadializationwillbederivedfromthefollowingfactors:

March16,2012

CostBenefitRatioTheprimarydriverofswitchtowardsRadializationwould
be the Cost benefit ratio that the operators would be able to achieve by the
switchover.TheinitialcostforRadialTyreishigherwhencomparedtoBiasTyres
butoverthelifeofthetyrethebenefitsintermsoffuelefficiencyandlongerlife
provides higher benefits than the extra cost incurred. Going forward if the Cost
benefit ratio remains favorable, only then the demand for Radial tyres would
remainstrong.

11

IndianTyreSector

LackofAwarenessatuserendThedemandforRadialTyreshasbeensubdued
inIndiawhencomparedtoglobalcountriesonaccountoflackofusereducation.
Usersprimarilyoperatinginruralandsemiurbanareasarenotfullyawareofthe
benefits the radial tyres provide over longer term horizon. The operators are
therefore hesitant to shift the tyre procurement towards radial tyres especially
withtheinitialhighcostinvolved.

Retreading In tyre manufacturing process, nearly 80.0% of the manufacturing

costisincurredintyrebodyandremainingintheTreading,theportionofthetyre
which meets the road surface. The number of times a tyre can be retreaded is
nearly3timesincaseofRadialTyres(2TimesincaseofBiasTyres).IfRetreading
in India picks up in future, the new tyre demand would be more towards radial
tyresthanbiastyres.

Road Development Radialization would be beneficial if there is proper Road

Infrastructure in the country. Poor roads would dent the life span of the Radial
tyresandthuslosethebenefititgainswhencomparedtoBiasTyres.

CompetitiveScenario
The leaders in the industry are MRF Tyres, Apollo Tyres, JK Tyres and Ceat Ltd which
togethercommandover70.0%ofthemarketshare.

TyreIndustryMarketShare(FY11)

Source:IndustryReports,SushilFinance

As the Indian Tyre sector is significantly dependant on input materials like rubber and
crude derivatives, any increase in these costs directly impacts the profitability for the
industryasawhole.DuetohighcompetitivepressurewithintheIndianmarketsandeven
fromimports,thetyremanufacturersareunabletopassontheincreaseininputcoststo
the end customers completely which impacts the bottomline performance. Tyre sales
especially to the replacement segment are dependent upon the distribution network of
the company. Large companies with extensive distribution manage to generate high
volumewhichpartiallyoffsetsthesharpincreaseininputcosts.

WiththeTyreindustrygrowing,themanufacturershavebeenaddingupcapacitiesatthe
robustpaceintendingtoextendtheirgeographicalreachandalsofocusonhighermargin
radializedtyres.Thehugecapitalinvestmentsrequiredforsettingupnewplantalongwith
buildingbrandthroughmassiveadvertisingcreateshugebarriersforthenewentrants.
March16,2012

12

IndianTyreSector

CompetitiveScenarioofIndianTyreIndustry

High Barriers to Entry

due to huge Investment
required on new plant
setup, Advertising and
Branding costs and in
setting up of dealer
network. Due to these
high initial investments,
the gestation period
remainsveryhigh.

The market for Tyres is

price sensitive

which
makes it challenging for
Tyre Manufacturers

to
passonincreaseininput

costs to

the end
Margins
consumers.

tend
to
remain
under

severe
pressure
when

inputcostsrise.

Manufacturers have
to rely on rubber
prices and crude
prices which are key
determinants
of
input costs. Sharp
increase in these
costs lead to sharp
dent in profitability
oftheIndustry.

Indian
Tyre
Sector

Industry is dominated
by few big names
covering more than
70.0% of total Market.
This makes it tougher
for new entrants to
penetrate the market
inanysignificantway.

March16,2012

13

IndianTyreSector

KeyGrowthDriversforTyreSector
LongtermpositiveoutlookforAutoDemand
Auto Industry as a whole registered growth of nearly 45.0% during the two year period
ended2011.Thedemandhasbeenimpactedduringlastfewquartersimpactedduetolot
offactorswhichinclude
Higherfuelcosts
Risinginterestrates
SlowingcapexgrowthaffectingdemandforCommercialvehicles

Higher interest rates and rising oil prices substantially increased the cost of vehicle
ownership for fleet operators. In addition, the flat freight rates on major routes dented
profitabilityandcashflowsoffleetoperators.ThegrowthintheLCVislikelytobebetter
goingforwardaccordingtoindustryestimates.

AftertheM&HCVsegment,thePVsegmentisthesecondlargestcontributortorevenues
for the tyre industry contributing nearly 16.0% to the total industry revenues. Domestic
demandforpassengervehiclesreportedstronggrowthduringthelasttwoyears.

Inflation has now stabilized and interest rates have almost peaked improving consumer
sentiments.DemandisthereforelikelytoimprovefromFY13onwards.Thetwo wheeler
segment has been relatively less impacted by rising interest rates, owing to its limited
relianceonorganizedfinancing.

Theslowdownintheautodemandislikelytohavenegativeimpactondemandfortyresin
the short term. However, medium to long term growth fundamentals of the industry
remain strong owing to strong replacement demand and growth in OEM segment. Few
other factors which would drive growth is improving road infrastructure resulting in
reduced vehicle turnaround time, restrictions on overloading and investments in
infrastructurewhichcontinuetosupportdemandforCVs.Otherfactorssuchasfavorable
demographics, rising disposable income, under penetration of vehicles, strong demand
fromruralmarketsandavailabilityoffinancingatcompetitiverateswoulddrivelongterm
demandforautomobiles.

RecentdeclineinNaturalRubberpricestoimproveprofitability

Indian Tyre industry is highly raw material intensive industry and margins are highly
correlated to the price movements of raw materials. In simple terms, the movement in
Natural Rubber prices can make or break the fortunes of the Tyre Manufacturers. The
prices of Natural rubber, the key raw material constituting around 44.0% of total raw
materialcosts,witnessedasharpriseduringFY11.Domesticrubberpricesincreasedfrom
lowsofRs.100perkginmid2009tohighsofalmostRs.240perkginApril2011.

Thisrisewasonaccountofsharpincreaseindemandcoupledwithrisingcrudeoilprices
andspeculativetradingonexchangesinrubberfutures.Supplysidedisruptionsbyadverse
climatic conditions in key rubber cultivating countries like Thailand, Indonesia, India and
Chinafurtheraddedtotheincreaseinprices.

TyresCompaniesacrossIndiaandgloballytookseveralpriceshikestocounterthesharp
riseinrubberpricesduringFY2011.However,thehikeswerenotenoughtocoverupfor
the entire input cost rise and significantly impacted the margins of the manufacturers.
Nevertheless, the situation started improving from start of FY12 when prices of Natural
Rubberstartedtodeclinefromthepeak.Domesticpriceshavedeclinedandstabilizedat
near Rs.190 per kg levels. Going forward, the removal of antidumping duty against
Chinese and Thailand TBRs with effect from August 2011 may impact the replacement
marketfordomestictyremanufacturers.

March16,2012

14

IndianTyreSector

NaturalRubberTrend(ProductionandConsumption)

Source:ATMA,SushilFinance

Domestic Production of Natural Rubber FY11 grew by 3.7% YoY as against the
consumption growth of 1.8%. In absolute terms production for FY11 stood at 0.86 mn
tonnesasagainstconsumptionof0.95mntonnes.Importsduringtheperiodstoodat0.18
mntonnes.

According to reports, Domestic Production of Natural Rubber is estimated to be around

0.90mntonnesandConsumptionestimatedat0.97mntonnesforFY12.Indiaisexpected
to import around 0.17 mn tonnes to meet the domestic demand and export 0.03 mn
tonnes.

BrentSpotCrudePriceTrend

Source:EIA,SushilFinance

BackwardIntegrationcanprotectmarginsgoingforward
Themarginsoftyremanufacturersarehighlycorrelatedtothemovementinrubberprices
as was witnessed during FY11. During FY11, margins declined sharply at industry level
owingtothesharpupmoveinnaturalrubberpricesandtheinabilityoftyrecompaniesto
fullypassontherisetotheendconsumersespeciallyOEMs.

Tyre manufacturers are now increasingly looking out to isolate themselves from
fluctuation in Natural Rubber prices and are now looking at backward integration
measures such as acquiring rubber plantations. Leading Tyre Manufacturers like Apollo
TyresandJKTyresarelookingoutforacquisitionofNaturalRubberPlantationsglobally.As
tyre companies generally do not have medium to long term contracts with rubber
manufacturers, they are exposed to huge fluctuation in rubber prices. The backward
integration would help tyre manufacturers to an extent to reduce exposure to such
fluctuations.

March16,2012

15

IndianTyreSector

Marginsdependontheabilitytopassoninputpriceincreases

During200809,theindustryenjoyeddeclineinkeyrawmaterialcostsofrubberandcrude
owing to slowdown in the Global Economy. The benefits of lower input costs were
witnessed in Q4 of FY 2009. The trend of soft input costs was witnessed until Q4 FY10
when the raw material price trend reversed with Natural Rubber prices moving up by
above50.0%intheCY2011.Asthespikeinthekeyinputmaterialtookmostbysurprise,
the pass on of prices to customers was delayed and restricted due to competitive
pressure.

TheCompanieswithstrongpresenceinthereplacementmarketareinabetterpositionto
pass on increase in Raw Material prices to the end consumers. As replacement markets
functionthroughCompanyownedoutletsandFranchisemodel,thepricechangescanbe
implemented faster when compared to supplying to OEMs. The pricing power in the
replacement markets, however, has been curbed to an extent, especially in the T&B
segment,duetocompetitionfromlowerpricedChineseimports.

The pricing power when it comes to dealing with OEMs remains weak leading to low
profitability. This disadvantage in pricing is however partially compensated by assured
ordersinheavyvolumesbytheOEMs.Generally,manytyremanufacturersareunableto
have raw material escalation clauses with OEMs to offset the impact of any steep cost
increases. Despite the fact, having decent presence in the OEM segment is equally
important for tyre manufacturers to establish their brand in the retail market as first
replacementoftyreispreferredtobeofsamemodelwhichwasfittedbytheOEM.

Indiantyremanufacturershaveundertakenpricehikesofover10.015.0%duringthepast
12 months. The price hikes have partially compensated for the overall cost increases in
prices of key raw materials. With rubber prices having cooled off since last few months,
furtherpricehikesareveryunlikely.

InternationalparticipantsmakingIndiaahubforradialtyremanufacturing

Indiantyreindustrycurrentlyisdominatedbydomesticparticipantscateringtoover85%
ofthedomesticrequirement.Theimportedtyresarepricedatapremiumoverdomestic
tyres.InanextremelypricesensitivemarketlikeIndia,buyersarehesitanttopayanykind
ofpremiumforrelativelysuperiorproducts.Alsotheimportedtyreslosetheiredgeover
Indian tyres owing to poor road conditions which limit the benefits of higher durability,
lower emissions and safety. The Indian market was also dominated by Cross Ply tyres
especiallyinT&Bspacewhichalsodiscouragedglobalmajorsfromenteringintodomestic
markets. As a result, investments in India by international players have been relatively
modestinthepast.

However with Indian consumers shifting more towards Radialization and constant
improvementsinroadinfrastructuretakingplace,thedemandforpremiumtyresisonthe
rise.GlobalOEMsareincreasinglypickingIndiaasmanufacturinghubandthedemandfor
high quality radial tyres in the Indian market is set to grow at a robust phase over the
mediumterm.

March16,2012

16

IndianTyreSector

SWOTANALYSIS

STRENGTHS

WEAKNESS

More than 70.0% of Industry

turnoverisfromtop4Companies.
The brand name plays a critical
role especially in the replacement
market.

Wellestablished brandnames and

distribution network by existing
playersandhighcapexrequiredfor
setting up plant create huge entry
barriers for new players to
penetratethemarket.

OPPORTUNITIES

The fortunes of the industry are

highly dependent on pricesofkey
raw materials such as rubber and
crude oil and any sharp rise can
impactprofitabilitysignificantly.

TheTyreIndustryisunabletopass
on majority of price hike to end
consumerduetohighcompetitive
pressure which impacts the
marginperformance.

THREAT

Automobile Industry growth has

beenstronginlastfewyearswhich
would lead to rise in replacement
demandgoingforward.

With ongoing development of

infrastructure, particularly roads,
the automobile and tyre industry
are expected to capitalize on this
opportunity.

Increase

in shift towards
Radialization especially in T&B
segmentlikelytoimproveindustry
profitabilityincomingfuture.

Biggest threat for tyre companies

is increase in prices of Natural
rubber, which accounts for
majority of total raw material
costs.

Imported Tyres from China, has

been a challenge for Indian
manufacturers. Imports from
China now constitute around
56.0%ofmarketshare.

Majority of other input costs for

tyre manufacturing are crude
derivatives. With crude prices
scaling upwards, added pressure
on raw material prices can prove
tobeathreat.

Cyclical nature of automobile

industryimpactsdemandfortyres.

March16,2012

17

IndianTyreSector

Outlook

The tyre industry registered growth of nearly 25.0% in revenues backed by healthy
demand from OEM and Replacement segments. The huge demand was supported by
capacity rampup by major players. The growth was driven by strong domestic OEM
demandfromtheT&B,PVandtwowheelersegmentswhichsawsharpincreaseinvolume
growthduringtheyear.

The demand for M&HCV segment is largely driven by demand from the replacement
market, which accounts for more than 80.0% of total demand. The Passenger and two
wheelersegmentsaremajorconstituentsoftheOEMsegment.M&HCVsegmentaccounts
for bulkoftyre industryrevenuesaccounting for nearly60.0%share invalueterms. The
priceincreasesimposedbymosttyremanufacturersinlinewithrisingrubberpricesledto
adeclineindemandfromtheM&HCVsegment.

Higher input costs especially that of natural rubber led to a sharp decline in operating
profitsfortheindustry.Companieswhichhadsalesmixofhigherpresenceintherelatively
highmarginradialpassengercarsegmentandhigherpresenceinthereplacementmarket
segment which offers better pricing ability have been able to post relatively better
performance. On the other hand players having high presence in OEM segment were
unabletopassonpriceincreasesininputcostsbeyondanextentandfacedpressureon
marginperformance.

ForFY13,automotiveOEMtyredemandisexpectedtoreviveowingtoexpecteddeclinein
interestratesleadingtohigherdemandforAutomobiles.ThestronggrowthinOEMsales
during the last two years is expected to translate into higher replacement demand,
especiallyinthepassengercarsegment.IntheM&HCVsegment,thegrowthisexpected
to remain muted in short term as macro economic factors may dampen demand in the
OEM and the pricesensitive replacement segments. However the long term growth
prospectsforCVsegmentasawholeremainspromising.

RemovalofantidumpingdutyonTBRimports
Growth in the T&B segment has been robust during last two years led by rising shift
towards Radialization, lower cost of imported T&B tyres and capacity constraints in the
domestic markets. In February 2010, antidumping duty was imposed on TBRs imported
fromChinaandThailandtoprotectdomesticmarket.

HowevereffectiveAugust2011,thedutyhasbeenremovedafterstrongoppositionfrom
Global tyre companies like Bridgestone and from domestic OEMs like Tata Motors Ltd.
This is expected to make imported TBRs cheaper thus limiting the pricing power of
domesticplayersinreplacementtyremarkettherebyimpactingindustrymargins.

March16,2012

18

IndianTyreSector

Snapshot

MRFTyresLtd.(CMP` 9981)

HOLD

OriginallyestablishedasMadrasRubberFactory,asmalltoyballoonmanufacturingunitin
1946inMadras(Now,Chennai),MRFhasevolvedasaleadingtyremanufacturer.Besides
tyres,MRFhasbusinessinterestsinPretreads,Paint&CoatsandToys.Thecompanynow
stands as the largest tyre manufacturer in the country and one of the leading tyre
manufacturersworldwide.ThecompanybecamethefirstIndiancompanytoexporttyres
toUSA(thebirthplaceoftyretechnology)in1967andnowexportstoover65countriesin
USA,Europe,MiddleEast,JapanandAsiaPacific.

SHAREHOLDING(%)
Promoters
FII
FI/MF
BodyCorporates
Public&Others

27.03
2.44
12.01
23.75
34.77

The Company has 6 manufacturing units each at Puducherry, Kottayam, Tiruvottiyur,

Arkonam,Medak&GoaandadiversifiedSalesNetworkacrossthecountry.Anewplantat
Perambalur, near Tiruchirapalli in Tamil Nadu will be operational in 2012 with an initial
MRF.BO capacityof3.5LacTrucksandCarRadials.TheCompanysProductofferingsincludeTyres,
MRFIN ConveyorBelts,PretreadsandPaints&Coats.TheCompanyisaleadingmanufacturerof
500290 tyresinalmostallthesegments.

STOCKDATA

ReutersCode
Bloombergcode
BSECode
NSESymbol

MRF

ThetyresofferedbyMRFareforPassengerCars,TwoWheelers,Trucks&Buses,OTRand
FarmServices Vehicles. The Company also manufactures andsells Tubes andFlaps. MRF
alsomanufacturesconveyorbeltsunderitsbrandMUSCLEFLEXforMining,Quarries,Ports,
4.24mn ThermalPowerPlants,CementPlants,SteelPlants,FertilizerPlants,PaperManufacturing,
FertilizerIndustriesandalsoexportstomorethan15countries.

Market
Capitalization*

`42,319mn
US$846mn

Shares
Outstanding*

52Weeks(H/L) ` 10336/6200

During FY11, the Company produced 34.77 mn Automobile tyres and 31.38 mn
Automobiletubesrunningatmaximumutilizationrates.TheCompanyalsomanufactured
4,547Shares 1,056MTofTreadRubber,7,683MTofPrecuredTreads,2,042MTofConveyorBeltsand
1,484KLofSpecialtySurfaceCoatingsthroughoutsourcedproduction.

Avg.Daily
Volume(6m)

PricePerformance(%)
1M

3M

6M

42

42

DuringFY11,thenetsalesregisteredarobustgrowthof31.6%from` 74,587.3mninFY
2010 to ` 97,439.8 mn in FY 2011. In addition, the company experienced a substantial
improvementatthenetlevelasthereportednetprofitincreasedfrom` 3,575.1mninFY
2010to` 6,187.8mninFY2011.Thenetmarginimprovedfrom4.8%inFY2010to6.4%
inFY2011.

200DaysEMA:` 7624

*Onfullydilutedequity
shares

Goingforward,weexpectMRFtobenefitonbackofitsleadershippositionintheTyre
industry.TheCompanyismarketleaderinthePCsegmentandholdsthe2ndpositionin
the M&HCV segment which generates nearly half of the volumes for MRF. Ithas been
able to maintain its operating margins at decent levels even during rising input costs.
TheMarginsareexpectedtoimproveonincreasingshifttowardsRadializationintheCV
segmentanddecliningtrendinnaturalrubberprices.AsthedemandfromCVsegmentis
likelytoberobustfromOEMandReplacementmarket,theCompanywouldbeableto
increaseitsoverallmarginperformance.

Although we remain optimistic about long term growth prospects of MRF, we believe
the current valuations discount the positives. We therefore recommend investors to
HOLD the stock at current levels and we would review the Company performance in
comingquartersandreviewourratingsaccordingly.

KEYFINANCIALS (Cons.)

Y/E
Revenue
EBITDA EBITDA
PAT
P/E P/Sales ROE(%) ROCE

Sep.
(`mn)
(`mn)
Margin
Margin (x)
(x)
(%)
(%)
(%)

FY09
FY10
FY11
March16,2012

56,682.9
74,587.3
97,439.8

7,156.1
8,627.2
12,344.4

12.6
11.6
12.7

4.4
4.8
6.4

17.0
12.0
6.9

0.7
0.6
0.4

20.4
23.2
17.5

21.2
23.7
15.0
19

IndianTyreSector

JKTyresandIndustriesLtd.(CMP` 72)

Snapshot

ThecompanybelongstotherenownedJKGroupofRajasthanbasedSinghaniaswhohave
business interests in Cement, paper, textile, sugar, insurance, fairy foods, Agriproducts
andmanyotherbusinesses.IncorporatedinFebruary1951inWestBengal,thecompany
was originally meant for managing agency business. In February 1972, the company
obtainedtheletterofintentformanufacturingautomobiletyresandtubes.Sincethenthe
companyhasevolvedtobecomeoneoftheleadingtyremanufacturersofthecountry.

BUY

SHAREHOLDING(%)
Promoters
FII
FI/MF
Government
BodyCorporates
Public&Others

47.35
16.42
4.91
0.7
12.33
18.30

Thecompanyhas5manufacturingplantsinthecountrystrategicallylocatedinKarnataka,
MadhyaPradeshandRajasthan.Thecompanyhas3tyremanufacturingplantsinMysore,
Karnataka,1inBanmore,MadhyaPradeshand1inKankroli,Rajasthan.Thecompanyalso
forayedintotheoverseasmarketsbyacquiringTornel,aMexicobasedtyremanufacturing
companywhichhas3tyremanufacturingplantsinMexico.

STOCKDATA

ReutersCode
BloombergCode

JKIN.BO
JKIIN

BSECode
NSESymbol

530007
JKTYRE

Market
Capitalization*

`2,952mn
US$59mn

Shares
Outstanding*

41.06mn

52Weeks(H/L)

` 113/54

Avg.Daily
Volume(6m)

24,578
Shares

Thecompanymanufacturestyresformorethan15PassengerCarOEMsincludingHonda,
Maruti,TataSkoda,Toyota,Ford,FiatandMitsubishi.ThecompanyoffersbothBiasand
RadialtyresforTrucksandBuses.Thecompanysproductofferingsincludetyresforlight
trucks,farmbasedandOTRsaswell.Thecompany'sproductsaremarketedundertheJK
TyreandVikrantbrands.

During FY11, the company produced 8.598 mn of automotive tyres, 5.462 mn of

automotivetubesand2.447mnofautomotiveflaps.DuringFY11,thenetsalesregistered
a robust growth of 30.1% from ` 45,705.8 mn in FY 2010 to ` 59,454.4 mn in FY 2011.
However,thebottomlineexperiencedasignificantfallasthereportednetprofitdeclined
from` 2,197.4mninFY2010to` 625.5mninFY2011.Thenetmargincontractedfrom
4.8% in FY 2010 to 1.1% in FY 2011 primarily due to increase in Materials and
Manufacturingcosts,asapercentageofrevenues.

PricePerformance(%)
1M

3M

6M

(16)

17

(9)

JKTyres&IndustriesLtdisoneoftheleadingplayersintheTBR&PCRsegment.With
interestratesexpectedtodecline,thePV&CVsegmentsarelikelytowitnessrecovery.
The Company faced pressure of higher commodity prices, labor unrest and currency
impact which impacted its performance during last few quarters thus dented margins.
TheperformanceduringQ3FY12hasshownreversaltrendandwithrubberpricesbelow
`200perkglevels,marginsarelikelytoimproveincomingquarters.

200DaysEMA:` 82
*Onfullydilutedequityshares

Wehaveapositiveoutlookonthelongtermgrowthprospectsoftheautoindustryand
expect the revenues to improve with labor issues resolved. With recent correction in
rubber prices we expect margins to expand in coming quarters. We recommend
investors to BUY the stock at current levels for initial upside of 20.0% from current
levels.

KEYFINANCIALS (Cons.)

Y/E
Revenue
EBITDA EBITDA
PAT
P/E P/Sales ROE(%) ROCE

March.
(`mn)
(`mn)
Margin
Margin (x)
(x)
(%)

(%)
(%)

(2.0)
0.05
3.1
FY09
55,227.0
1,892.5
3.4
NA
NA

4.8
0.06
31.7
FY10
45,705.8
5,209.2
11.4
1.3
23.2
FY11

March16,2012

59,454.4

3,262.7

5.5

1.1

4.6

0.05

10.1

10.2
20

IndianTyreSector

CeatLtd.(CMP` 87)

Snapshot
BUY

CeatTyresofIndiaLtdwasestablishedintheyear1958,incollaborationwithTATAGroup.
Subsequently,theRPGGrouptookoverthecompanyin1982andrenameditasCEATLtd
in1990.Company caters to varioussegments which includes tyresfor heavyduty trucks
andbuses (T&B), light commercialvehicles(LCVs), passenger cars (PC),earthmoversand
forklifts(Specialtysegment)and2wheelers.

SHAREHOLDING(%)
Promoters
FII
FI/MF
Government
BodyCorporates
Public&Others

51.29
1.81
14.28
0.00
7.31
25.31

The Truck & Bus segment is the largest contributor to the companys topline, covering
61.0%oftheproductportfolio.Theothersegmentslike23wheelers,Passengervehicles
and Off the Road vehicles contributes almost equally towards the sales however the
contributionfromtheIndustrialvehiclessegmentstillremainslow.

STOCKDATA
ReutersCode
BloombergCode
BSECode
NSESymbol

ThecontributionfromtheReplacementmarkettothetoplinewasabout75.0%lastyear
and with the robust growth witnessed in the Auto sector the replacement market will
CEAT.BO
remain buoyant going forward. As the company enjoys relatively higher margin in the
CEATIN
Replacementsegment,itwillremaintobethehighestcontributortothetopline.

500878
CEATLTD

Market
Capitalization*
Shares
Outstanding*

Ceat Ltd has recently ramped up its production facilities to cash in on the huge growth
expected in the Auto industry. Ceat has invested in a Greenfield radial manufacturing
`2978.9mn
facilityatHalolinGujaratwithacapacityof150TPDforTruckandBuses,Lighttrucks&
US$60mn
passenger car radials. Post expansion the total capacity increased from 410 TPD to 595
34.24mn TPD.

The Company procured 50 acre land at Ambernath in Thane, Maharashtra and will be
shifting
its Bhandup facility to that plant. Currently the finished goods produced at
Avg.Daily
Bhandup
face heavy Octroi duty as applicable in Mumbai. The Bhandup plant is Ceats
49,195Shares
Volume(6m)
oldestmanufacturingfacilityandhasnowbecomelessEnergyefficient.AstheCompany
shiftsitsfacilitytoAmbernath,itwouldsignificantlysaveonOctroidutyandenergycosts
PricePerformance(%)
whichwouldimproveitsoverallmarginsgoingforward.DuringFY11,theconsolidatednet
1M
3M
6M
salesregisteredarobustgrowthof26.4%from` 28,504.3mninFY2010to` 36,023.9mn
(9)
17
5
in FY 2011. However, the bottomline experienced a significant fall and the net profit
declined from ` 1,642.0 mn in FY 2010 to ` 319.3 mn in FY 2011. The net margin
200DaysEMA:` 89
contractedfrom5.8%inFY2010to0.9%inFY2011primarilyduetoincreaseinMaterials
*Onfullydilutedequityshares
costs.
52Weeks(H/L)

` 120/66

WehaveapositiveoutlookfortheCompanyonthebackofstrongtoplinegrowth,rising
exports, increasing capacity in high margin radial segment. The Company also
commenced commercial production from its new Halol facility for Radial Tyres. The
capacityoftheplantis150TPDwhereCeatexpectstoproduce50.0%TBRand50.0%of
PCR tyres. The total capacity of 150 TPD would be commercialized only by April 2012
eventhoughinitialmanufacturinghasstarted.RadialTyresbeinghighmarginproducts,
marginsimprovementislikelygoingforwardowingtotheshiftinitsproductmix.
Ceatsprofitabilityhasbeenunderpressuretolaborrelatedstrikesandspikeinrubber
pricesduringlastfewquarters.Howeveroutlookforcomingquartersremainpromising
andprofitabilityislikelytoexpand.WehavedetailedinitiationcoverageonCeatLtdfor
target price of ` 141. We maintain our BUY rating on the stock at current levels for
targetpriceof` 141.

KEYFINANCIALS (Cons.)

Y/E
Revenue
EBITDA EBITDA
PAT
P/E P/Sales ROE(%) ROCE
March.
(`mn)
(`mn)
Margin
Margin (x)
(x)
(%)

(%)
(%)
FY09
FY10
FY11

March16,2012

25,136.9
28,504.3
36,023.9

860.4
3,451.0
1,798.2

3.4
12.1
4.9

(0.9)
5.8
0.9

NA
1.8
11.7

0.12
0.10
0.08

NA
25.8
5.2

2.5
23.2
6.9
21

IndianTyreSector

Snapshot

ApolloTyresLtd.(CMP` 81)

HOLD

Apollo Tyres Ltd (ATL) is one of Indias leading tyre manufacturer based at Gurgaon,
Haryana with operations across Asia, Africa and Europe. Apollo has eight manufacturing
facilities across these three geographies. Recently the company has started operations
fromitsChennaifacilityandisexpectingtoreachfullproductionof500TPDbyFY2013.

ApollostoplineiscontributedmainlybytheT&Bsegment(75%)whilecarscontribute14%
of revenues. At the same time, replacement is the biggest revenue segment for Apollo.
Apollo derives 65% of its revenues from the replacement markets, 24% from OEMs and
therestfromexports.

SHAREHOLDING(%)
Promoters
FII
FI/MF
Government
BodyCorporates
Public&Others

46.39
23.16
10.32
1.98
7.42
10.74

STOCKDATA

The company currently produces 960 TPD of tyres from the domestic operations. It
acquired the South African operations of Dunlop inCY 06. In May 2009, Apollo acquired
APLO.BO VredesteinBandenB.V.basedatNetherlandswhichisamanufacturerofnichehighend
APTYIN passengercarandspecialtytyreswithstrongdistributionnetworkacrossEurope.

ReutersCode
Bloomberg
Code

BSECode
NSESymbol

500877
APOLLOTYRE

The company has 3 production units in India Limda in Gujarat and Kalamassery and
PerambrainKeralawhichcollectivelyproduce850TPDtyres,Chennaifacilitywith150TPD
Market
`40,824.0mn capacity while South Africa and Europe producing 180 TPD and 150 TPD of tyres
Capitalization*
US$816mn respectively.

Shares
Outstanding*

RecentlytheCompanyannounceditsplanstoinvestaround400mnEuros(morethanRs
2,500cr)tosetuptwonewfacilitiesinEastEuropeandBrazilinthenext34years.This
` 86/51 wouldhelpthecompanyexpanditsglobalfootprint.Theproposedfacilityisexpectedto
346,940 haveaninitialcapacityof710mnunitsperyear.Thecompanyisalsokeepingitsoptions
Shares opentoacquireatyrefirmintheLatinAmericanmarkettocommenceitsoperations

504.02mn

52Weeks(H/L)
Avg.Daily
Volume(6m)

DuringFY11,theconsolidatednetsalesregisteredagrowthof9.2%from` 81,207.4mnin
FY2010to` 88,677.2mninFY2011.However,thebottomlineexperiencedasignificant
fallasthenetprofitdeclinedfrom` 6,533.5mninFY2010to` 4,401.6mninFY2011.
Theadjustednetmargincontractedfrom8.0%inFY2010to5.0%inFY2011primarilydue
toincreaseinMaterialscosts,asapercentageofrevenues.

PricePerformance(%)
1M

3M

6M

(4)

26

33

200DaysEMA:` 68

*Onfullydilutedequityshares

ATLholdsthesecondlargestmarketshare(19.0%)afterMRF.Ithasverystrongpresence
in domestic CV segment. It generates majority of the consolidated business from
Replacementsegment.ThecompanyisincreasingitsradialcapacityatitsChennaiplant.
AsthedemandfromreplacementmarketremainsrobustonbackofgoodOEMdemand
witnessed in FY10, ATL would be able to use the additional capacity for replacement
market which would drive volume growth. Margins are also likely to improve due to
increasing contribution from high margin radial segment and recent decline in natural
rubberprices.
Although we remain optimistic on the outlook of the Company, we recommend
investorstoHOLDthestockatcurrentlevelsaswebelieveneartermpositivesarepriced
in. We will send a detailed update on the stock once the Company releases its FY12
results.

KEYFINANCIALS (Cons.)

Y/E
Revenue
EBITDA EBITDA
PAT
P/E P/Sales ROE(%) ROCE
March.
(`mn)
(`mn)
Margin
Margin (x)
(x)
(%)

(%)
(%)
2.8
0.82
10.3
FY09
49,840.7
4,536.7
9.1
30.2
16.0
8.0
0.50
33.2
FY10
81,207.4
13,025.7
16.0
6.3
35.5
FY11

March16,2012

88,677.2

10,173.5

11.5

5.0

9.4

0.46

18.2

17.4
22

IndianTyreSector

PeerComparison(Consolidated)

ApolloTyresLtd
Price/Earning(P/E)
Price/BookValue(P/BV)
Price/CashEPS(P/CEPS)
EV/EBIDTA
Price/Sales(P/S)
CEATLtd
Price/Earning(P/E)
Price/BookValue(P/BV)
Price/CashEPS(P/CEPS)
EV/EBIDTA
Price/Sales(P/S)
MRFLtd*
Price/Earning(P/E)
Price/BookValue(P/BV)
Price/CashEPS(P/CEPS)
EV/EBIDTA
Price/Sales(P/S)
JKTYRE**
Price/Earning(P/E)
Price/BookValue(P/BV)
Price/CashEPS(P/CEPS)
EV/EBIDTA
Price/Sales(P/S)

201103
8.0
1.5
5.0
5.7
0.4
201103
13.8
0.6
5.7
7.5
0.1
201109
4.5
1.2
3.2
4.1
0.3
201103
6.0
0.5
2.3
5.6
0.1

201003
5.5
1.8
4.0
3.8
0.4
201003
3.2
0.8
2.7
3.0
0.2
201009
10.5
2.2
6.0
5.8
0.5
201003
3.6
0.9
2.5
3.5
0.2

200903
6.8
0.7
3.5
3.2
0.2
200903
NA
0.3
12.5
7.8
0.1
200909
9.8
1.8
4.9
4.3
0.4
200903
NA
0.4
11.6
6.8
0.0

200803
7.6
1.7
5.1
3.7
0.4
200803
2.6
0.8
2.1
2.7
0.1
200809
9.3
1.2
4.2
5.5
0.3
200709
5.7
1.0
2.8
4.8
0.1

200703
11.4
0.1
0.6
4.5
0.3
200703
12.9
1.3
7.1
5.8
0.2
200709
9.4
1.6
4.9
5.1
0.4
200609
26.0
1.0
4.8
8.5
0.2

SOURCE:CAPITALINE;*ApolloTyresYearendingSept;**JKTyre2009periodconsist18months

Note The above multiples are based on historical valuations and not based on the current market
price.

PleaseNotethatourtechnicalcallsaretotallyindependentofourfundamentalcalls.

Additional information with respect to any securities referred to herein will be available upon
request.

Sushil Financial Services Private Limited and its connected companies, and their respective directors, Officers and
employees(tobecollectivelyknownasSFSPL),may,fromtimetotime,havealongorshortpositioninthesecurities

mentioned and may sell or buy such securities. SFSPL may act upon or make
use of information contained herein
priortothepublicationthereof.

This sheet is for private circulation only and the said document does not constitute an offer to buy or sell any
securitiesmentionedherein.Whileutmostcarehasbeentakeninpreparingtheabove,Weclaimnoresponsibilityfor
itsaccuracy.Weshallnotbeliableforanydirectorindirectlossesarisingfromtheusethereofandtheinvestorsare
requestedtousetheinformationcontainedhereinattheirownrisk.

March16,2012

23