Target: ₹335
CMP: ₹277.30
Apollo Tyres recorded a strong operating performance in Q2-FY23 with EBITDA margin coming at 12 per cent (down 61 bps y-o-y and up 35 bps q-o-q) due to regular price hike, tight cost control and better operating leverage. Consolidated revenue increased 17 per cent y-o-y (flat q-o-q) to ₹5,960 crore, due to strong performance of Europe business coupled with healthy India operations. Standalone revenue grew 17 per cent y-o-y (down 4 per cent q-o-q) to ₹4,250 crore. t. Adjusted PAT stood at ₹194 crore (up 10 per cent y-o-y and up 2 per cent q-o-q) due to higher interest expenses on higher debt level.
Operating leverage, regular price hikes, falling commodity cost and geographical mix would aid margins. We expect double-digit growth in FY23, on account of the new capacity, healthy OEM demand, revival in replacement demand and positive traction in exports.
We expect a strong volume traction in FY23-FY24 on the back of production ease for OEMs and a likely revival in replacement demand in CVs. We expect the higher export contribution at favourable exchange rate and price hikes to benefit the company on the revenue front.
We maintain Buy on Apollo Tyres with a revised Target Price of ₹335 (vs ₹290 earlier).