Emkay Global Financial's report on Apollo Tyres
In its analyst meet, APTY highlighted revenue target of USD5bn in FY26, implying 16% CAGR over FY21-26E vs. 8% CAGR over FY16-21. Revenue growth will be driven by underlying industry growth, premiumization, and market share gains in India and Europe. Management expects ROCE (pre-tax) to increase from 9% in FY21 to 12-15% by FY26E, led by better asset turnover. Future capacity expansions would be only through debottlenecking and brownfield capacities. Medium-term EBITDA margin guidance stands at over 15%, driven by premiumization and cost-reduction initiatives, such as reduction in material usage, digitization efforts and plant specialization initiatives.
We are factoring in revenue/earnings CAGRs of 12%/14% over FY21-24E. We maintain Buy with a TP of Rs290 (unchanged), implying an EV/EBITDA of 7x and P/E of 16x on FY23E estimates.