CLSA has initiated coverage on the Indian tyre sector with an optimistic outlook, citing structural profitability improvements and better capital efficiency. The firm believes the ₹1 lakh crore (~$12 billion) Indian tyre market is at the cusp of a margin upcycle, aided by rising pricing discipline, improved product mix, and softening input costs.
With truck and bus (T&B) tyres forming around 50% of the market, CLSA expects the mix to shift towards higher-margin passenger car radials (PCRs), thanks to increasing car ownership in India. The brokerage believes the sector is currently at the bottom of its margin cycle and gross margins are set to recover meaningfully over FY26-27.
Among stocks, CLSA has initiated coverage on MRF with an Overweight rating and a target price of ₹1,28,599, Apollo Tyres with a High Conviction Outperform rating and a TP of ₹566, and Ceat with an Outperform rating and TP of ₹3,493.
The brokerage highlights that free cash flows (FCF) in the tyre space are relatively agnostic to revenue growth and are primarily driven by margin cycles and capital discipline—both of which are favourable heading into FY26.
Disclaimer: The above views are of the broker’s and not the author or the publication’s. Please make any and every investment decision after consulting your financial advisor.
