Apollo Tyres Q2 Review - On The Right Track; Value Drivers Firmly In Place: ICICI Direct

ICICI Direct Report

Apollo Tyres Ltd. is a leading tyre manufacturer, with operations in India and Europe with an installed capacity of ~7.9 lakh million tonne per annum.

In India, ATL has substantial presence in truck and bus radial tyre (31% market share) and passenger car radial tyre space (21% market share).

Derives ~67% revenues from APMEA (largely India), ~32% from Europe.

FY21 segment mix: Truck/bus ~43%, PV ~35%, OHT ~11%, others ~11%

The company posted a healthy operational Q2 FY22 performance.

• Total consolidated operating income was up 10.7% QoQ to Rs 5,077 crore.

• Ebitda margins rose 20 bps QoQ to 12.6% amid limited gross margin dip.

• Consolidated PAT at Rs 174 crore was up 36% QoQ.

Key triggers for future price performance

• Expected India commercial vehicle cyclical rebound, higher radialisation levels, pent up demand in PV and network expansion to be major topline drivers. We expect India-led 16.9% FY21-23E net sales CAGR.

• Higher cost competitiveness post Dutch plant specialisation, Europe mix improvement, operating leverage benefits to result in 13.8% FY23E margins.

• Ongoing deleveraging focus to accentuate PAT, return ratio momentum.

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