Apollo Tyres - Q2FY21 First Cut - ICICI Direct

(CMP: Rs. 148; MCap: Rs. 8,466 crore)

Apollo Tyres reported healthy Q2FY21 performance, with all parameters being above our estimates. Consolidated EBITDA margins came in at 16.2%, a four year high.

Q2FY21 Earnings Summary

- Total operating income on consolidated basis stood at Rs. 4,283 crore, up 7.4% YoY vs. our estimates of Rs. 3,867 crore. Within key geographies, revenue from APMEA region (largely India) came in at Rs. 2,964 crore (up 4.8% YoY), while revenue from Europe region stood at Rs. 1,372 crore (up 12.3% YoY)

- EBITDA for the quarter stood at Rs. 695 crore (up 60.8% YoY) with attendant EBITDA margins at 16.2% (up 538 bps YoY) as against IDirect estimate of Rs. 534 crore & 13.8%. Margin improvement was attributable to savings in all cost heads, with gross margins expanding 260 bps to 46.3%, while employee costs and other expenses came down by 36 bps and 246 bps respectively on percentage of sales basis. APMEA EBIT margins rose 758 bps YoY to 13.9% while Europe continued to post a loss at EBIT level

- Consequent consolidated PAT came in at Rs. 200 crore (IDirect Estimate: Rs. 84 crore), up 1.4x YoY. Higher sales and margins lead to jump in profitability despite larger interest and depreciation outgo on YoY basis

- The company more than doubled CFO generation to Rs. 1,866 crore for H1FY21 (aided by lower inventories and higher payables) and also posted positive FCF of Rs. 1,231 crore

Apollo Tyres' Q2FY21 performance largely followed the trend of other domestic peers, whereby margins were at multi-year high levels. Quantum of margin sustainability going forward is the key and we await management commentary on the same along with demand prospects. We will be coming out with a detailed report after the earnings conference call scheduled for today evening.

Shares of APOLLO TYRES LTD. was last trading in BSE at Rs.147.9 as compared to the previous close of Rs. 142.95. The total number of shares traded during the day was 717524 in over 7701 trades.

The stock hit an intraday high of Rs. 149.25 and intraday low of 142.8. The net turnover during the day was Rs. 105045102.

Source : Equity Bulls

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