Sharekhan is is bullish on Apollo Tyres has recommended buy rating on the stock with a target price of Rs 108 in its research report dated May 20, 2020.
Sharekhan's research report on Apollo Tyres
Apollo Tyres Limited (ATL) posted better than expected operating results for Q4FY20. Despite steep fall in topline due to weak demand, operating margins improved driven by soft commodities and cost control measures. Demand is picking up with faster recovery expected for the replacement segment which forms 75% of revenues. Relaxation of lockdown norms and increased usage of personal vehicles post CONVID-19 would lead to recovery. With commodity prices expected to remain soft and cost control measures, we expect margins to improve further. We expect strong 33% earnings CAGR over next two years.
P/E of 7.4x FY22 earnings and P/B of 0.5x are attractive and below long term historical averages. Have fine tuned earnings to factor near term demand weakness. Retain Buy with revised PT of Rs 108.
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