Apollo Tyres Ltd. Outlook deteoriates, Maintain REDUCE :Emkay

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Apollo Tyres Ltd.

Outlook deteoriates, Maintain REDUCE

REDUCE

CMP: Rs67                                        Target Price: Rs66

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n     APAT at Rs 755 mn ~12% above est. driven by strong top line Rs 28.2bn (~13% above est.) and better margins (~8.5% vs our est. of ~8.4%)

n     Outlook deteriorates - subdued demand/production cuts and withdrawal of anti dumping duty in India. South Africa perf. also subdued while winter tyres demand drives Europe perf.

n     Lower our EPS by 13.5%/8.5% in FY12/13 to factor in rising competitive intensity and higher interest/dep. costs

n     Maintain REDUCE with a TP of Rs 66 (FY12 PER – 8.6x). Continue to maintain risk reward as unfavorable, upward stock price movement will be driven by fall in rubber prices