Accumulate Apollo Tyres; target Rs 94: Dolat Capital

Dolat Capital is bullish on Apollo Tyres and has recommended accumulate rating on the stock with a target price of Rs 94 in its May 10, 2012 research report.

"In 4QFY12, Apollo Tyres’ revenue was Rs32.3bn, up 18% YoY. This was led by 28% revenue growth in India operations. While its European subsidiary reported a 9% revenue growth led by sales of winter tyres, South African subsidiary continued to be a laggard with a 4% YoY decline. Apollo reported EBITDA at Rs 3602mn, up 38% YoY. Lower rubber prices during the quarter aided margins (180bps decline QoQ). The Indian standalone operations also saw an improvement in its EBIDTA margins by 160bps QoQ to 9.6%, mainly led by lower raw material costs. The company reported a consolidated PAT of Rs 1581mn. Its EBIT margins improved 200bps at its European operations and 220bps in India. Other income for the quarter stood at Rs 263mn compared to Rs 33mn in previous quarter."

"On the demand front, the company asserted that OEM demand has slowed down in the passenger car segment. The commercial vehicle tyre demand continues to be stable. However, demand continues to be robust in the replacement market. Rubber prices are currently hovering ~`195/kg. On the margin front, the shift from OEM to replacement market will definitely improve its margins. Currently ~73% of its total sales are in the replacement market. The stock currently trades at 7.0x FY14E. We maintain Accumulate with a target price of Rs 94," says Dolat Capital research report.

Public holding more than 90% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More