ICICI Direct's research report on Apollo Tyres
Apollo Tyres (ATL) reported a steady performance in Q1FY20 with replacement volume growth of ~12% in domestic operations helping it overcome the muted prospects on the OEM front. Consolidated revenues came in at Rs 4,331 crore (up 1.0% YoY). Revenues from APMEA increased 0.9% YoY to Rs 3,142.0 crore while revenue from Europe was up 2.4% YoY at Rs 1,238.8 crore. Consolidated EBITDA declined 10.1% YoY to Rs 475 crore (EBITDA margins at 11.0%, up 103 bps QoQ). While ATL’s gross margins expanded 152 bps sequentially, gains were limited due to higher employee cost as well as higher other expenses. Consequent, consolidated PAT declined 43.9% YoY to Rs 141.6 crore.
Outlook
At the current margin trajectory, RoCE profile is also muted at ~8% and offers little comfort. With buoyant replacement demand- the only solace, we maintain our HOLD rating on the stock with a revised target price of Rs 145 i.e. 9X P/E on FY21E EPS of Rs 16.2/share.
For all recommendations report, click here
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