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Result Update: Apollo Tyres Ltd - ACCUMULATE - TP Rs.301 - Kotak

Posted On: 2018-08-05 07:57:36

APTY reported strong revenue growth in 1QFY19. Operational performance was robust YoY on account of strong volume growth and lower raw material prices. However, as compared with 4QFY18, increase input cost impacted EBITDA margins.

Key Highlights

- Consolidated revenue in the quarter grew by 31% YoY to Rs42.9bn. APTY reported revenue growth at both India and European operations. Consolidated EBITDA in the quarter increased by 92% YoY on the back of increased revenues and reduction in raw material cost. In 1QFY18, due to rise in raw material prices, margins and earnings were significantly impacted. Accordingly the high growth is also due to low base. On the back of improved operational performance and low base, PAT increased from Rs883mn in 1QFY18 to Rs2,518mn. On a QoQ basis, net profit growth remained flat.

Valuation and Outlook

- We expect healthy volume growth for the company in FY19 and FY20. Currently company plants in India are operating at high capacity utilization. Chennai plant TBR facility ramp-up and additional PCR capacity through de-bottlenecking and reduced export to Europe is expected to support growth arising from expected healthy demand. In Europe, the new Hungary plant will drive volume growth. EBITDA margin in 1QYF19 was impacted (QoQ) on account of increased raw material prices. This trend is expected to continue into 2QFY19. Over the medium to longer term, Hungary plants profitability is expected to improve. APTY has increased its capex guidance. Over FY19-21, company's plans to invest Rs65bn in India and Rs10bn in Europe. We retain ACCUMULATE rating on the stock with price target of Rs301 (earlier 300).

Shares of APOLLO TYRES LTD. was last trading in BSE at Rs.286.5 as compared to the previous close of Rs. 286.3. The total number of shares traded during the day was 106715 in over 933 trades.

The stock hit an intraday high of Rs. 290.65 and intraday low of 285.15. The net turnover during the day was Rs. 30695912.


Source: Equity Bulls

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