Sharekhan Places A “Buy” On This Tyre Stock, Sees Strong Demand In India & Europe

Sharekhan has suggested investors to buy the Stock of Apollo Tyres as the brokerage sees strong demand in India and Europe for tyres.

Beneficiary of better automobile demand and global revenues

Sharekhan expects the domestic tyre industry to benefit from a recovery in automobile sales in rural, and urban markets, driven by pent-up demand, preference for personal mobility amid COVID-19, and faster-than-expected recovery in infrastructure, mining, and other economic activities. "The tyre industry is well-positioned to gain momentum going forward backed by higher OEM offtake and the ripple effect of OEM demand is likely to result in steady growth for the replacement demand going forward," the brokerage has said.

Market share gains

According to Sharekhan, the company has a leadership position in the truck and bus segment, which is the largest market segment in the country. In addition, the company holds the top position in the passenger vehicle segment. "Apollo Tyres has improved its market share across the segments in Europe markets. It has expanded its distribution footprint significantly over the last two years, increasing touchpoints in rural markets by more than four times. The Vredestein brand continues to hold its dominant position in the fast-growing PCLT segment in Europe. The company is gaining a share in focused categories such as UHP/UUHP PCR, TBR, and agri in the overseas markets," the brokerage has said.

Apollo Tyres: Price target of Rs 372

Sharekhan has a price target of Rs 372 on the stock of Apollo Tyres with a buy call. "Tyre demand has improved significantly in domestic and European operations. ATL is well-positioned to gain market share in India and Europe, given its strong brand, R&D, technology, and distribution network. We expect the company to benefit from its strategy by deleveraging its balance sheet, improving capacity utilisation, and focusing on firm capital allocation and cash management in the near term. Strong growth coupled with a leadership position in key markets and segments will likely re-rate valuation multiples. The stock trades at attractive valuations at a P/E multiple of 10.7x and an EV/EBITDA multiple of 5.4x its FY2025E estimates. We retain a Buy rating on the stock with a revised price target of Rs. 372," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.