Emkay Global Financial has given Buy recommendation for Apollo Tyres with a target price of Rs. 290 in its research report issued on Jun 28, 2021
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.
Outlook
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.