Emkay Global Financial has given Buy recommendation for Apollo Tyres with a target price of Rs. 275 in its research report issued on Aug 16, 2022

Emkay Global Financial’s research report on Apollo Tyres

Apollo Types’ Q1FY23 revenue increased by 7% qoq (3-year CAGR at 11%) to Rs59.4bn, in line with estimates. EBITDA increased by 10% qoq (3-year CAGR at 13%) to Rs6.9bn, 7% above estimates, due to better gross profit and lower employee costs. APMEA’s EBIT margin expanded by 70bps to 4.8%, while Europe’s EBIT margin was flat at 4.9%. Management expects benefits of commodity price easing in Q3. We expect a 17% CAGR in APMEA revenue over FY22-24E, led by strong recovery in the OEM segment and stable replacement demand. We believe European revenue should register an 8% CAGR with pick-up in replacement demand and market share gains. We have increased our FY23E-24E EBITDA by 3-5%, mainly due to better gross margin assumptions and cost savings. Following the revision, we expect revenue/EBITDA CAGRs of 15%/19% over FY22-24E.


With strong FCFs of Rs13bn/year over FY23-24E, we expect Net Debt-to-EBITDA to drop to 1.3x in FY24E from 2.1x in FY22. We maintain our Buy rating with a revised TP of Rs275 (Rs245 earlier), applying 13x Sep’24E EPS (Jun’24E earlier).

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