Goodyear India Ltd

Message

   Synthesis:

Tyre sector was in doom last year but shot up recently. FY09-10 results are good for entire tyre sector then comes the misery, raw material Rubber prices are soaring and to combat it tyre manufacturers are planning to raise the prices, investors are not sure on valuations and future outlook. In all this hum-drum few bets are evolving, GoodYear seems to be one of that. 

Domestic outlook for tyre segment is better for following reasons:

1) New sales for vehicle is picking up as evident from annual results of reputed NBFCs and logistic rentals are northwards.
2) Infrastructure in India will probably take another millenium to be of good standard so demand for replacement will remain robust due to fast wear and tear. 
3) Vehicle companies (BMW, VW, Maruti etc) are figting a war in introducing new brands in India. Fuel efficiency is a major diffrentiators for burgeaoning middle class. Good quality tyre is an inportant component for increasing fuel efficiency.

GTL is 80 year old company in India and 1st one to introduce flat tyes.Now lets look at comparative analysis of the GoodYear:

CMP
Mcap
Sales
NP
PE
ROE (%)
PM
D/E
DIV

Goodyear
252
582
1016
73.09
7.96
34.55
7.16%
0
3%

Apollo
64.5
3248
5036.8
415
7.83
NA
2.63%
0.5
1%

MRF
7423
3117
5672
253
12.44
18.82
4.50%
0.21
0%

Balkrishna
585
1130
1395
208
5.42
15%
14.91%
>1
1%

GTL is debt free and increasing the cash flow decently.

Dec ' 09
Dec ' 08
Dec ' 07
Dec ' 06
Dec ' 05

Net cashflow-operating activity
146.41
30.33
52.91
78.18
54.61

Profit has grown from 32 Cr to 73 cr in Dec 09 (Year ending). Profit from Mar 10 qtr is grown from 11 Cr to 14 Cr so its looks on growth trajectory. 

Parent shareholding is fixed at 74%. Parent in US is in trouble hence would be paying extra attention to child to sustain consolidated BS.

In the passenger car segment, Goodyear supplies tyres to many of the leading Original Equipment Manufacturers in India. These include Maruti, Telco, Mahindra & Mahindra, Ford, Fiat and many more. Goodyear India has been a pioneer in introducing tubeless radial tyres in the passenger car segment. 

In the farm segment, Goodyear tyres are supplied to all the major Tractor manufacturers like PTL, ITL, TAFE, Eicher and Escorts. Similarly, for buses and trucks, vehicles rolling out of the assembly line of the leading OEMs like TELCO, Ashok Leyland, and Swaraj Mazda are often seen with Goodyear tyres. Goodyear commands a major market share in the Off The Road (OTR) segment by being a major supplier to Coal India Limited, Escorts, L&T, TISCO and major steel plants of the country. 
Launch of branded retail “shop-in-shop” concept – a part of the company’s strategic initiative in organized tyre retailing, aimed at strengthening its presence in the large tyre replacement market in the country. These outlets will offer customers an unmatched tyre purchase experience.

Goodyear India rolls out the Excellence series – a new collection of luxury passenger car tyres. Designed with the ultimate '3 -Zone Technology', and ECO-Sil Silica Tread Compound Technology, the tyre provides superior comfort and precise handling on both wet and dry conditions for premium car drivers. 

Valuation: Div yield is 3% and growth would be now onwards 12-25% as per my guessstimates. Its slightly expensive in absolute but relatively cheaper as compared to peers so recommnded to buy on dips.