Morgan Stanley downgrades Apollo Tyres to equal weight; keeps target price to Rs 425/share

Brokerage firm Morgan Stanley has downgraded Apollo Tyres Ltd to equal weight from overweight and kept a target price at Rs 425 a share from its current market price.

In its investor meet, Apollo Tyres said it will maintain its focus on improving return on capital employed (ROCE) and profitability, instead of solely pursuing market share growth. The company aims to achieve this by capitalising on stronger growth opportunities within the passenger vehicle (PV) segment, which offers better profit margins.

Apollo Tyres also plans to leverage the trend of premiumisation in the industry by increasing the sale of higher rim sizes, contributing to improved profitability. The company also anticipates gaining market share in the premium PV categories, which will positively impact its overall margins.

Apollo Tyres has set forth its goals for the near future, aiming to achieve a revenue of $5 billion by FY2026. Additionally, they plan to enhance their EBITDA margin beyond 15 percent, while consistently maintaining a pre-tax Return on Capital Employed (RoCE) within the range of 12-15 percent. They are determined to keep their net debt-to-EBITDA ratio below 2.