Limited Period Offer:Be a PRO for 1 month @Rs49/-Multiple payment options available. Know More

Hold Apollo Tyres; target of Rs 95: Emkay Global Financial

Emkay Global Financial recommended hold rating on Apollo Tyres with a target price of Rs 95 in its research report dated May 20, 2020.

May 23, 2020 / 12:04 PM IST
 
 
live
  • bselive
  • nselive
Volume
Todays L/H
More

Emkay Global Financial's report on Apollo Tyres


Q4FY20 revenues declined by 16% yoy to Rs36.1bn (est.: Rs35.5bn) and earnings plunged by 58% yoy to Rs779mn (est.: Rs353mn). Earnings came in above estimates due to higher-than-expected operating margin of 13.2% (est. 10.7%) and a lower tax rate. We expect revenues to grow at a muted 2% CAGR over FY20-22E. Growth is likely to be subdued due to near-term weakness and gradual recovery in both Europe and India regions. Any delay in demand pick-up could impact margins and liquidity position, as current debt is large at Rs60bn and capex is expected at Rs13bn in FY21. The ROE is likely to remain below 10% over FY20-22E due to low asset turnover and margins. We reduce FY21E EBITDA estimate by 11% to Rs18.3bn, but broadly retain FY22E forecast at Rs23.8bn. Our FY22E EPS is reduced by 9% to Rs10.6 due to higher depreciation and interest costs. Retain UW stance and Hold rating with a TP of Rs95 (Rs105 earlier), based on 9x FY22E EPS.



Outlook


Our FY21/22E EPS forecast has been reduced by 50%/9% to Rs4/Rs10.6, due to a reduction in revenue assumptions and increase in depreciation/interest costs. We are introducing FY23E EPS of Rs13.3, factoring in revenue growth of 10% and EBITDA margin of 14%. Retain Hold rating with a TP of Rs95 (Rs105 earlier), based on 9x FY22E EPS. In sector EAP, we have an UW stance on the company. Key upside risks are higher-than expected demand in key geographies, faster ramp-up of production at the Hungary plant, decrease in commodity prices, and benign currency movements.





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 decisio

Broker Research
first published: May 23, 2020 12:04 pm

stay updated

Get Daily News on your Browser
Sections