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NEW DELHI: The auto sector, and by extension auto ancillaries, were cruising on a highway a couple of months back, but as a devastating second wave of the Covid-19 pandemic surfaced, these stocks have hit a number of bumps and got slowed down.
Analysts now say CEAT, a smallcap tyre manufacturer, appears to be getting bruised badly from the jolts. They say rising raw material costs, declining demand and lower cash flow generation will likely hurt the stock’s prospects in the coming year.
Siddhartha Bera, an analyst at Nomura, said the company’s March quarter numbers were below expectations. “There are growth and margins headwinds ahead,” he said, adding that strong commodity cost pressure and additional capex would impact the firm’s free cash flow generation, swelling its debt burden.
Five ways to bring down your motoring expenses thecourier.co.uk - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from thecourier.co.uk Daily Mail and Mail on Sunday newspapers.
Shares of Balkrishna Industries slipped 8 per cent to Rs 1,700 on the BSE in Tuesday s intra-day trade as investors booked profit after the company announced capital expenditure (capex) plan of up to Rs 1,900 crore, which will be funded by internal accruals and debt, if required. The stock of auto tyres and rubber products has corrected 10 per cent from its record high level of Rs 1,885 touched in intra-day trade today. At 10:45 am, it was trading 7 per cent lower at Rs 1,719 as compared to a 0.41 per cent risen in the S&P BSE Sensex. Looking at the overall increase in demand, the board at its meeting held on Tuesday, February 8, 2021, has approved a capex plan of Rs 1,900 crore, which include Brownfield project at Bhuj to increase tire capacity, increase carbon black capacity including advance carbon black and power plant at Bhuj and modernization, automation and technology upgradation capex at existing facilities.