10000 to 4crs in 18 months 1000rs to 50crs 300% returns 75% promoter holdings A 50 bagger A sureshot 5 bagger Analysis Another fraud? Auto ancillaries Bank sector Blind sell Brand plays Broking Bse Nse Buy calls cements Ceramics/tiles Counters I don't like Debt free businesses Delisting candidates demerger bets Disclosure- I own them Domestic consumption plays E-Commerce pick Education Exit at rallies Famous analysts Famous stocks FMCG Footwear future multibaggers Gems andJewellery Hidden gems High conviction ideas High dividend plays High potential small caps High ROE stocks Holding companies Hotel sector How they looted you.. Indian stock market Infrastructure sector Interesting Microcaps IT KPO Landbank plays largecap ideas Less than 5 PE stocks Liquor Logistics Market lessons Market outlook for 2013 and 2014 Market underperformers Meeting with the CEO Metals Monopoly businesses My 5 baggers My Favourite counters My paid stock recommendations My stock picking techniques nse bse tips Oil exploration Operator calls Paints Penny stock outlook penny stock updates Pharma sector Poultry stocks PSU Publicity freaks Real estate Renewable energy plays Safe bets Sell recommendations Share market Live shipping stocks short term call SOTP plays stock tips stock under 10rs Stocks to watch out for Strong bonus candidates Takeover candidates TATA product tea Textiles The 13 bagger The 45 bagger Trading companies Transformers Turnaround bets Tyres Uncertain/Risky business models Unique businesses

Search This Blog(Over 800 companies covered in the blog).

Archives : Old artciles

Friday, December 16, 2011

Rubber sector:-Industry outlook/prospects/competition/high and low prices/beneficiaries/listed stocks/recommendation/manufacturers/views/potential

Rubber prices have eased 40% from the February 2011 peak of $341 a tonne and are hovering around their year-ago levels.Rubber is the key ingredient used in making tyres. Firm rubber prices have been hurting the margins of tyre companies. The cost of raw material has risen and now constitutes over 75% of the total revenues of tyre companies. This makes the tyre industry extremely raw material sensitive.

As latex prices started to cool in February 2011, the stock price of Apollo Tyres, which was at a 52-week low began to rise. It gained 75% from February to July and then started to decline. This was mainly because of the fall in the rupee which hurt the company?s performance. Since it imports about 50% of its raw materials, the rupee depreciation increased the company?s cost of production which was visible.

While the growth in operating profit and net sales has remained strong, the operating margins remain under pressure. The raw material cost as a proportion of net sales also has risen to 67%. To secure a captive source of natural rubber, the company has entered the area of rubber plantations, albeit in a small way. The drop in rubber prices boosted the September quarter performance of CEAT. The raw material cost as a proportion to net sales dropped to 75% from 80.6% in the June quarter. This led to an improvement in operating margins from -1.2% in the June quarter to 5.5% in the September quarter. The operating profit also logged a jump of 39% y-oy in the September quarter against a 30% drop in the preceding quarter. The markets also picked up this signal and the company''s stock has risen since November.

After its performance peaked in December 2010, Goodyear India ?s performance has been declining. In September 2011 there was marginal improvement as the drop in operating profit and net profit was not as high as in the preceding quarter. The proportion of raw material cost to net sales also declined by 120 bps from the June quarter. For JK Tyre, the drop in rubber prices failed to boost its performance. Despite the 100-bps drop in the proportion of raw material cost in the September quarter, the performance worsened sequentially. The company posted negative operating margin of 1.3% against 4.6% on account of rupee depreciation. For MRF, the cost of raw materials to net sales has come down from 76% in the June quarter to 73% in September. This helped the company to post a 125 bps sequential improvement in margin. However, the operating profit fell by 7.8% versus the 6.2% drop posted in the June quarter.

The December quarter may see an improvement in margins as the proportion of raw material cost to net sales comes down further. Despite this, the high prices of the raw material still remain a challenge for the tyre companies, specially for those who are dependent on raw material imports.

Important Disclaimer&Privacy policy

This blog does not share personal information with third parties nor do we store any information about your visit to this blog other than to analyze and optimize your content and reading experience through the use of cookies.You can turn off the use of cookies at anytime by changing your specific browser settings.This privacy policy is subject to change without notice and was last updated on 20.3.2013. If you have any questions, feel free to contact me directly here: Investment in equity shares has its own risks.Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that I consider reliable. I,however,do not vouch for the accuracy or the completeness thereof.This material is for personal information and am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.The stock price projections shown are not necessarily indicative of future price performance.The information herein, together with all estimates and forecasts, can change without notice.

Subscription to Arunthestocksguru

Enter your email address:

Delivered by FeedBurner