Hold Apollo Tyres; target of Rs 436: ICICI Securities

ICICI Securities research report on Apollo Tyres

Apollo Tyres (APTY) is trading at ~15x FY25E earnings vs ~7% EPS CAGR during FY24E-FY26E. As against ~6% India volume CAGR over FY24-26E, we expect India EBITDAM/FCF/RoCE to remain steady during the same period, with business remaining exposed to the mean reversion in GM. We expect India EBITDAM to remain close to the current elevated levels of 18-19% till Q1FY25E, based on current RMB cost trends that may be driving the optimism in the stock currently, other than the controlled capex till FY25E. We believe all good fundamental parameters of the business are priced for perfection in current valuation level, leaving limited room for any earnings upgrade.

Outlook

Maintain HOLD with a revised DCF-based TP of INR 436 (earlier INR 412), implying 15x FY25E earnings. Change in TP is due to earnings rollover to FY26.