Buy Apollo Tyres; target of Rs 510: ICICI Securities

ICICI Securities's research report on Apollo Tyres

Apollo Tyres’ (APTY) Q3FY25 standalone EBITDAM was down 100bps QoQ at 11.1% on RM cost increase. EU EBITDA margin increased ~290bps QoQ despite RM price increase, led by higher mix of UHP tires and cost-reduction initiatives. APTY expects RM prices to remain stable in Q4. In terms of demand, replacement segment continues to do well and the company expects this segment to drive growth going forward. OEM segment demand remains weak; however, it is seeing early signs of recovery. Its revenue growth is lagging peers and it is undertaking multiple initiatives to address this gap. Post ~20% stock price correction in the last six months, and considering stable RM costs and early signs of recovery in both CV and PV segments,

Outlook

We upgrade APTY to BUY from Reduce with DCF-based revised TP of INR 520 (earlier: INR 461), implying ~15x FY27E EPS.