Tyre manufacturers are reaping the benefits of a 20 percent drop in rubber prices so far this year. Stocks gained as much as 34 percent during the same period. The cheer, however, may be short-lived with a number of indicators hinting at a reversal. Rubber prices on the Shanghai Futures Exchange recovered more four percent from the week’s low to close at Renminbi 14,835 per metric tonne.
All tyre companies, with the exception of MRF, are currently trading at a substantial premium to the estimated price-to-earnings for the current financial year.