Dolat Capital is bullish on Apollo Tyres and has recommended buy rating on the stock with a target of Rs 101 in its February 6, 2013 research report.
“In 3QFY13, Apollo’s consolidated revenue remained flattish at Rs32.2bn. This was mainly due to ~3% YoY decline in India operations. While its European subsidiary reported a flattish revenue growth, South African subsidiary grew ~ at 6% YoY.”
“Apollo reported EBITDA at Rs3,822mn, up 17% YoY. Improved sales mix and stable rubber prices during the quarter aided margins. It had reported 10.0% in 3QFY12. The company reported a consolidated PAT of Rs1806mn. Its EBIT margins stood at 8.3% for Indian operations, and 17.2% for Europe. It reported 1.2% EBIT margins for South African subsidiary compared to -7.7% in 3QFY12.”
“On the demand front, the company asserted that OEM demand has slowed down. The replacement demand especially in the commercial vehicle tyre demand continues to be stable. In the overseas market, while recovery is expected in South Africa, Europe continues to be a laggard. On the margin front, softening of the rubber prices and the shift from OEM to replacement market has improved its margins. Currently ~73% of its total sales are in the replacement market. In the overseas market, margins continue to be under pressure in South Africa due to cheaper imports by competitors while Europe continues to give the company its best margins from any geography. We introduce our FY15 estimates. We expect the revenue for FY13-15 to grow at a CAGR of ~10% and margins to remain ~11.4%. The stock currently trades at 6.3x FY14E and 5.6xFY15E. We recommend Buy,” says Dolat Capital research report.
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