CLSA initiated coverage on MRF with an ‘Overweight’ rating and a price target of ₹128,599, indicating a potential upside of 14% from Wednesday’s closing price.
was initiated with a ‘High Conviction Outperform’ rating and a price target of ₹566, suggesting a potential upside of 38%.
CEAT received an ‘Outperform’ rating, with CLSA ascribing a price target of ₹3,493. This target implies a potential upside of 30% from Wednesday’s close.
CLSA wrote in its note that the Indian tyre market, valued at about $12 billion, is undergoing a structural improvement in terms of profitability and capital efficiency. This change is being driven by rising pricing discipline, better product quality and an improved product mix.
With truck and bus tyres (T&B) comprising for about 50% of the market, CLSA expects a gradual shift towards higher-margin passenger car radials (PCR), supported by the increasing car population.
The brokerage believes the sector is currently at the bottom of its margin cycle and that softening input commodity prices will support a rebound in gross margins over the coming quarters.
Additionally, CLSA said that free cash flow (FCF) in the tyre sector tends to be resilient to revenue growth trends. Instead, it is primarily driven by margin cycles and capital expenditure discipline — factors that CLSA expects will improve valuations in FY26–27.
Shares of MRF are down 19% from their peak, while those of CEAT and Apollo Tyres are down 24% and 30% from their respective peaks.
Shares of MRF and Apollo Tyres have opened with gains of over 2% on Friday, while those of CET are up 1.63% in early trading.
