Buy Apollo Tyres; target of Rs 160: Sharekhan

Sharekhan's research repor on Apollo Tyres

Demand has recovered significantly in both India and Europe led by Government Unlock measuresand increased preference for personal transport. Apollo expected to post flat revenues in Q2FY21 as compared to 34% drop in Q1; FY22 likely to witness strong recovery. Employee restructuring at Vredestein and cost-control measures to improve margins in Europe; Apollo aims for 14-15% margins from 9-10% currently. We rollover our multiple to FY23 earnings. With a pick-up in earnings and tapering of the capex cycle, Apollo is expected to be FCFF positive from FY23. P/E of 9.4x FY23 earnings is lower than long-term historical average of 11x.

Outlook

We retain a Buy rating on Apollo Tyres Ltd (Apollo) with revised PT of Rs. 160; Strong 23% earnings CAGR likely over FY20-23.

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