Emkay Global Financial's report on Apollo Tyres
In its analyst meet, APTY management reiterated its revenue target of USD5bn in FY26, implying a 15% CAGR over FY22-26E vs. a 9% CAGR over FY18-22. Revenue growth will be driven by underlying industry growth, premiumization, and market share gains in India and Europe. Management maintained the ROCE (pre-tax) target at 12-15% by FY26E (7% in FY22), led by better asset turnover and margins. Future capacity expansions would be done mainly through debottlenecking and brownfield capacities. Margin expansion is expected to be driven by premiumization and cost-savings, such as reduction in material usage and digitization efforts. In the near term, cost pressures due to an increase in prices of crude derivatives and a lag in the pass-through of commodity inflation are likely to impact margins. We reduce FY23E/FY24E EPS by 8%/5% to Rs10.1/Rs17.9. Following the revision, we expect revenue/earnings CAGRs of 15%/33% over FY22-24E.
The stock trades at 17x/10x P/E on FY23E/24E earnings. Near-term stock performance would depend on the movement of crude prices as derivatives form a major portion of RM costs (40%+). We retain our positive view on expectations of a cyclical upturn in the underlying automobile industry and improving free cash flows (avg. Rs13bn/year over FY23E/24E). Reaffirm Buy with a TP of Rs245 (Rs255 earlier), applying 13x Jun’24E EPS.
At 15:02 hrs Apollo Tyres was quoting at Rs 174.50, down Rs 1.45, or 0.82 percent.
It has touched an intraday high of Rs 180.30 and an intraday low of Rs 167.15.
It was trading with volumes of 194,881 shares, compared to its thirty day average of 205,283 shares, a decrease of -5.07 percent.
In the previous trading session, the share closed down 0.17 percent or Rs 0.30 at Rs 175.95.
The share touched its 52-week high Rs 250.00 and 52-week low Rs 165.40 on 18 October, 2021 and 07 March, 2022, respectively.
Currently, it is trading 30.2 percent below its 52-week high and 5.5 percent above its 52-week low.
Market capitalisation stands at Rs 11,082.51 crore.
For all recommendations report, click here
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.