India’s auto boom is creating another opportunity. These 3 tyre stocks are worth watching

India’s automobile market is growing, and the benefit is not limited to car and two-wheeler manufacturers. Tyre companies are seeing strong demand as well, helped by an ageing commercial vehicle fleet, higher SUV sales, the growth of electric vehicles and rising rural demand. 

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But there is a catch. Most of the major listed tyre companies are growing at double-digit rates, yet their earnings are not moving at the same pace. Rising raw material prices have been a drag on margins, and it is interesting to see the companies manage their cost plus work on other areas to improve the business. 

In this scenario, CEAT, Apollo Tyres and TVS Srichakra emerge as companies which stand out for different reasons. 

CEAT 

CEAT had a difficult first quarter of FY27. Consolidated revenue jumped 22.4 percent year-on-year to Rs 4318 crore, but the net profit declined sharply 96.4 percent to Rs 4 crore. Consequently, the EBITDA margin came down to 8.6 percent from 10.9 percent a year ago. 

The weak quarter came after a much better FY26. Revenue for the full year grew 18.6 percent to Rs 15,678 crore, while EBITDA margin improved to 13.2 percent from 11.3 percent. 

The recent pressure has largely come from higher input costs. Natural rubber prices rose sharply, taking CEAT’s raw material costs 16-18 percent higher sequentially. The integration of Camso’s off-highway business, acquired from Michelin, also added warehousing, distribution and personnel costs during the quarter. 

CEAT has responded with price increases. Replacement-market prices were raised by around 7 percent during Q1, taking the cumulative increase to roughly 11 percent by early July. The company was also planning another 4-5 percent increase. Prices for OEMs and exports have been raised as well. 

There is another part of the CEAT story that is easy to miss in the weak Q1 numbers. The company has been moving towards larger and more premium tyres. Its 17-inch-and-above passenger car radial business grew at a 50 percent CAGR between FY21 and FY26. CEAT also had around 25 percent market share in both four-wheeler and two-wheeler EV segments. 

The next few quarters will show whether the price increases are enough to offset higher raw material costs and whether the Camso integration costs start coming down. 

Apollo Tyres 

Apollo Tyres' trailing price to earnings ratio (P/E) of 13 times is lower than its median P/E of 19.5 times for the last five years. With a price to earnings ratio (P/E) of 21.5 times earnings, CEAT is quite near to the industry P/E of 22.9 times and roughly in line with its five-year median P/E of 23 times.  
Due to growing input costs, the June quarter's profits were weak. EBITDA was 11.7% as opposed to 13.2% in the previous year. However, the revenue increased by 12.8% to Rs 7,398 crore. 

Additionally, Apollo is altering its operations throughout Europe. It moved production to sites in Hungary and India after closing its expensive Enschede facility in the Netherlands in June. The company anticipates that the action would lower expenses, and in the second half of FY27, the advantages should become more apparent.  
Despite the company's improved balance sheet and profitability, the stock has dropped by over 11% in the last year. 

TVS Srichakra 

TVS Srichakra has been the fastest-growing entity among the three, although the company has a long way to go before its recent improvement can be said to be part of a full-fledged turnaround. 

In Q1FY27, consolidated revenue rose 30.4 percent year-on-year to Rs 1,068 crore, taking it above the Rs 1,000-crore mark for the first time. Operating margin improved to 8 percent from 6 percent, while net profit increased 161.5 percent to Rs 34 crore. 

The numbers are encouraging, but the margin is still below the 10 percent level recorded in FY24. That leaves a question around how much of the recent improvement can be sustained. 

The company also has some specific challenges. Its US subsidiary, Super Grip Corporation, reported an operating loss of Rs 18 crore on revenue of Rs 92 crore in FY26. TVS Srichakra is meanwhile investing Rs 430 crore in capacity expansion in Uttarakhand and Madurai. 

The company remains heavily dependent on the two- and three-wheeler market, with its top three customers contributing 39.4 percent of revenue. That makes its performance more sensitive to changes in two-wheeler demand. 

The stock has already risen nearly 80 percent over the past year, meaning the market has also taken note of the improvement. 

Valuations tell a different story 

The three stocks are trading at very different valuations. 

Apollo Tyres' trailing P/E ratio of 13 times is lower than the five-year median of 19.5 times. CEAT is trading at 21.5 times earnings, which is close to the industry P/E of 22.9 times and roughly in line with its five-year median P/E of 23 times.  
With a five-year median P/E of 33.9 times, TVS Srichakra is the most costly of the three, at 40.6 times trailing profits.  
According to that valuation, investors are already anticipating a significant increase in TVS Srichakra's profits. The business has produced impressive growth, but it still needs to demonstrate that the margin improvement is sustainable. 

For CEAT and Apollo Tyres, there is already a longer track record of improvement in their underlying businesses. TVS Srichakra, meanwhile, is still trying to establish that its recent numbers are more than just a strong quarter. 

India’s tyre demand story remains favourable, but the three companies are at different points in their respective cycles. CEAT is dealing with a cost shock after a period of margin improvement, Apollo is showing the benefits of a stronger balance sheet, while TVS Srichakra is growing rapidly but still has to prove that the improvement can last.