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Nov 13, 2017 05:08 PM IST | Source:

Hold Apollo Tyres; target of Rs 245: Sharekhan

Sharekhan recommended hold rating on Apollo Tyres with a target price of Rs 245 in its research report dated November 02, 2017.

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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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