Sharekhan recommended hold rating on Apollo Tyres with a target price of Rs 245 in its research report dated November 02, 2017.
Sharekhan's research report on Apollo Tyres
Apollo Tyres reported weak operating performance for Q2FY2018. Topline for the quarter increased by 13% YoY to Rs.3,477 crore, backed by a mix of volume growth and price hikes. While domestic operations posted strong volume growth of 10%, volumes of European operations dipped 5%. Operating margin at 10.5% shrank 370BPS YoY and was lower than our estimates of 11.6%. Higher raw-material (RM) cost (RM/sales), which increased 540BPS YoY, dented operating margin. Further, higher start-up costs at the new Hungary plant impacted margins. Consequently, EBITDA at Rs.364 crore declined 17% YoY and came in below our estimates of Rs.401 crore. Higher depreciation expenses (up 31% YoY) due to commencement of Hungary plant and higher tax rate (TAX/PBT stood at 31.8% in Q2FY2018 as against 25.5% in Q2FY2017) further impacted profitability. Net profit at Rs.140.2 crore declined by 46% YoY, coming lower than ours as well as street expectations.
We downgrade our recommendation on the stock from Buy to Hold with a revised price target of Rs.245.
For all recommendations report, click here
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