Rs 26.5/share Dividend: Debt-Free Stock Zooms Before Ex-Dividend Tomorrow, Expect 13% Upside In 2-3 Quarters

Goodyear India, a leader in the tractor tyre industry in India and supplier to almost all leading tractor manufacturers, touched a new 52-week high on Tuesday, ahead of turning ex-dividend tomorrow for its dividend payout of Rs 26.5 per equity share for the financial year FY23. HDFC Securities sees nearly 13% potential upside in this auto ancillaries stock in the next two to three quarters. Among the key reasons behind the upside is that Goodyear is cash cash-rich and debt-free company.

On BSE, Goodyear India's share price closed at Rs 1440.80 apiece, up by Rs 12.10 or 0.85%. The stock also touched a new 52-week high of Rs 1451.10 apiece today.

For the fiscal year FY23, Goodyear recommended a final dividend of Rs 26.50 per share having a face value of Rs 10 each. The company fixed July 26 as the record date to determine eligible shareholders for the dividend payout. And hence, it will turn ex-dividend on Wednesday.

The final dividend is subject to the approval of the members in the forthcoming Annual General Meeting scheduled to be held on Wednesday, August 02, 2023.

Year-to-date, Goodyear stock price has zoomed by nearly 30% on BSE, while in a year, the upside is nearly 51% on the exchange. The company has a good track record of paying dividends. In FY22, the dividend payout was Rs 20 per share (200%).

At the current market price, Goodyear's dividend yield is at 1.85%.

Should you buy Goodyear India's share price?

In its research note dated July 24, HDFC Securities said sees Goodyear as a good bet on rural prosperity considering the drop in natural rubber prices, higher/stable price in the tyre replacement market, pricing discipline in the industry and improving financials.

The brokerage explained that Goodyear would continue to receive technology support from its parent company "GTRC", which is one of the world's leading tyre companies. GIL's excellent Balance sheet strength (zero debt company) and its MNC parentage (ultimate owner Goodyear Tire & Rubber - US) drive confidence in the company.

In its rationale, HDFC Securities note added, "GIL is a cash-rich, debt-free company and has reported good financial numbers over past few years. The last few years have witnessed strong tractor sales in the domestic market. GIL has recently witnessed market share gains due to rapid channel expansion and extraction, building synergies in the front end, innovation driving new product pipeline, leveraging the strength of Goodyear brand and building a best in-class team. We have tweaked the FY24E estimates, introduced FY25E estimates and upped the price target."

Thereby, the brokerage's note added, "We expect GIL's Revenue/EBITDA/PAT to grow at 12/23/26% CAGR over FY23-FY25E, led by increased sales volume and moderation in material prices. We expect RoNW to increase from ~19% in FY23 to ~27% by FY25E. We believe investors can buy the stock in the band of Rs 1370-1400 and add on dips in Rs 1230-1260 band (14.75x FY25E EPS) for a base case fair value of Rs 1519 (18x FY25E EPS) and bull case fair value of Rs 1624 (19.25x FY25E EPS) over the next 2-3 quarters."

Taking into consideration the current market price and HDFC Securities target, Goodyear has the potential to shine by nearly 13% in the upcoming quarters of FY24.

Disclaimer

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