2 Undervalued Tyre Stocks Trading Below Fair Value

India's tyre industry serves both original equipment manufacturers and the replacement market, with earnings closely tied to natural rubber prices, export demand and vehicle production cycles. Not every stock in the space trades at the same multiple. A screen of listed tyre stocks against the sector's average price to earnings ratio surfaces two names still priced below that benchmark.

Apollo Tyres and JK Tyre and Industries both currently trade below the broader tyre industry PE, despite posting positive return on equity. This piece breaks down why each stock screens as undervalued, what the underlying financials show, and the risks that come with owning tyre manufacturers.

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Why These Tyre Stocks Screen as Undervalued

The tyre industry currently carries an average price to earnings ratio of close to 21.2 times trailing earnings for companies in this manufacturing classification. A stock trading meaningfully below that average, while still posting positive return on equity, is a reasonable starting point for a relative valuation screen.

Both companies below clear that bar, with JK Tyre carrying the higher return on equity of the two, a distinction worth noting among tyre stocks that otherwise trade at very similar valuation multiples.

The table below lists these two companies alongside their current price, valuation multiple and return ratios.

Company	NSE Ticker	CMP (Rs)	PE Ratio	Sector PE	ROE	Market Cap (Rs Cr)
Apollo Tyres	APOLLOTYRE	440.15	16.50	21.24	12.39%	28,186
JK Tyre and Industries	JKTYRE	380.25	16.84	21.24	14.59%	11,062

Apollo Tyres: Larger Scale, Lower Leverage

Apollo Tyres manufactures tyres for passenger vehicles, commercial vehicles and two wheelers, with a presence across India and Europe. The stock trades at a price to earnings ratio of 16.50, below the sector average of 21.24, at a current price of around Rs 440.

Return on equity of 12.39 percent is supported by a debt to equity ratio of 0.22, the lower of the two tyre stocks in this list. On an EPS of Rs 26.90 and book value of Rs 264.92, the price to book multiple works out to 1.68, alongside a dividend yield of 1.35 percent.

JK Tyre and Industries: Higher ROE, Higher Leverage

JK Tyre and Industries manufactures tyres primarily for the commercial vehicle and passenger car segments, with a strong presence in the domestic replacement market. Its price to earnings ratio of 16.84 sits just above Apollo Tyres, at a current share price of around Rs 380.

Return on equity of 14.59 percent is the highest of the two names, though the debt to equity ratio of 0.81 is meaningfully higher than Apollo Tyres. On an EPS of Rs 22.78 and book value of Rs 210.23, the price to book multiple works out to 1.83, slightly above Apollo Tyres.

Valuation Snapshot: PE, PB and Dividend Yield

Beyond the headline price to earnings ratio, book value multiples and dividend yield highlight the different capital structures of these two companies. JK Tyre's higher return on equity comes alongside meaningfully greater leverage than Apollo Tyres.

Company	Price to Book	Book Value (Rs)	Dividend Yield	Debt to Equity
Apollo Tyres	1.68	264.92	1.35%	0.22
JK Tyre and Industries	1.83	210.23	1.04%	0.81

Apollo Tyres pays a slightly higher dividend yield despite trading at a marginally lower price to book multiple, while JK Tyre and Industries carries close to four times the leverage of Apollo Tyres to support its higher return on equity.

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Risks to Consider Before Buying These Tyre Stocks

A discount to the sector average price to earnings ratio does not remove company specific risk for tyre stocks exposed to raw material and demand cycles.

Natural Rubber Price Volatility

Natural rubber and crude derived inputs account for a large share of tyre manufacturing costs, and price swings in these commodities can compress margins even when volumes hold steady.

Leverage Sensitivity for JK Tyre

JK Tyre's higher debt to equity ratio makes its earnings more sensitive to interest rate movements and refinancing conditions compared with the lower leverage profile of Apollo Tyres.

Vehicle Production Cyclicality

Original equipment demand for tyres is tied to automobile production cycles, which can slow during periods of weaker consumer or commercial vehicle sales.

Export and Currency Exposure

Both companies have meaningful export exposure, making revenue sensitive to currency fluctuations and demand conditions in international markets, particularly Europe for Apollo Tyres.

How to Track These Tyre Stocks

Investors evaluating these two names should track quarterly volume growth, natural rubber price trends, and how the sector average PE moves relative to each company's own multiple over time, rather than relying on the valuation gap in isolation among tyre stocks. Comparing these numbers regularly is the most reliable way to judge whether the discount to fair value remains intact or has already closed.

Download the Univest iOS App or Univest Android App to track Apollo Tyres and JK Tyre and Industries share prices live and set price alerts.

Conclusion

Apollo Tyres and JK Tyre and Industries are the two tyre stocks currently trading below the sector's average price to earnings ratio of close to 21.2 times, while both maintain positive return on equity. That combination makes them worth a closer look for investors who already want exposure to India's tyre manufacturing theme, though raw material cost volatility and leverage differences mean position sizing and diversification still matter when adding these names to a portfolio.

FAQs on Undervalued Tyre Stocks

Which tyre stocks are trading below the sector average PE?

Ans. Apollo Tyres and JK Tyre and Industries are currently trading below the tyre sector's average price to earnings ratio of close to 21.2 times, based on live NSE and BSE pricing.

Is Apollo Tyres undervalued compared to its sector?

Ans. Apollo Tyres trades at a price to earnings ratio of 16.50, below the sector average of 21.24, while delivering a return on equity of 12.39 percent.

Which of these tyre stocks has the higher return on equity?

Ans. JK Tyre and Industries has a higher return on equity of 14.59 percent compared with Apollo Tyres at 12.39 percent, though it also carries meaningfully more leverage.

What is the market capitalisation of JK Tyre and Industries?

Ans. JK Tyre and Industries has a market capitalisation of around Rs 11,062 crore, with a price to earnings ratio of 16.84 against the sector average of 21.24.

Which of these tyre stocks carries more debt?

Ans. JK Tyre and Industries carries a debt to equity ratio of 0.81, close to four times higher than Apollo Tyres' ratio of 0.22.

What are the main risks in undervalued tyre stocks?

Ans. The main risks include volatility in natural rubber and crude derived input prices, leverage sensitivity to interest rate changes, cyclicality in vehicle production, and currency exposure from export markets.

Is a low PE enough reason to buy a tyre stock?

Ans. A price to earnings ratio below the sector average is a useful starting screen for tyre stocks but not a standalone buy signal. Investors should also review raw material cost trends, replacement demand and balance sheet strength before investing.