Apollo Tyres Reports 17% Revenue Growth,10% PAT Growth, Buy Stock For 21% Return

Leading brokerage firm Motilal Oswal has given a buy rating to the stock of Apollo Tyres. The company's revenue grew 17% YoY to Rs. 59.6b, while Adjusted PAT grew 10% YoY to Rs. 1.94b.

Stock To Buy: Target Price

The Current Market Price (CMP) of Apollo Tyres is around Rs. 298. Motilal Oswal has estimated a Target Price for the stock at Rs. 360. This stock has the potential to give a 21% return, in the upcoming 12 months.

Stock Outlook
Current Market Price (CMP)	Rs. 298
97Target Price	Rs. 360
Potential Upside	21.00%
52-week high share price	Rs. 303.60
52-week low share price	Rs. 202.70

Quarterly earnings

The company's EBIDTA grew 12% YoY to Rs. 7.1b. Revenue/EBITDA/ adjusted PAT grew 23%/16%/26% YoY in 1HFY23. CFO declined by 82% YoY to Rs. 1.46b due to an increase in working capital, leading to a cash FCFF outflow of Rs. 2.3b, despite a lower capex of Rs. 3.8b. Revenue grew 31% YoY to EUR181m, driven by 10% volume growth and price/mix benefit, and EBIDTA margin contracted by 2.3pp YoY to 15.3% due to higher cost.

Stock Valuation

Motilal Oswal maintained the Buy rating, and said, "India business is seeing signs of a recovery in TBR replacement. PCR replacement is stable and OEM demand is good. India revenue in FY23 is expected to grow at 20%. In the EU, it expects a market slowdown in PCR, TBR, and the OHT segment. APTY expects to outperformthe market with a focus on premiumization and market share gains. For FY23, it has hedged 80% of its energy requirements in its EU operation.

It is also reasonably hedged for FY24."

Demands

While replacement demand in its India business is picking up with good OEM demand, falling RM costs should aid operating margin. Its EU business will remain under pressure due to a market slowdown in all categories. The company's 2QFY23 performance was driven by price hikes in India and the EU, more than diluting the cost pressures. The performance of its India business was largely in line, led by OEM demand as replacement demand declined, while the EU business outperformed on market share gains.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.