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B l e a k p e r f o r m a n c e … b e lo w e x p e c t a t i o n s …
Apollo Tyres (ATL) announced its Q1FY12 results, which were below our
expectations with disappointing standalone results on the back of margin
shrinkages. ATL reported net sales that were above our expectations at |
1960.8 crore (I-direct estimate: |1681.3 crore), a jump of 74.9% YoY and
11.3% QoQ with management targeting net sales of | 80 billion for FY12.
Consolidated volumes jumped ~34.0% YoY at 1,25,000 tonnes with
Chennai facility averaging at 160 TPD level and expected to ramp up to
400-450 TPD by March 2012. On realisations front, we have seen a QoQ
increase of ~10.5% mainly due to the price hikes undertaken during the
quarter. EBITDA margin performance has been subdued at 8.0% (I-direct
estimate: 9.2%) as average rubber prices for ATL climbed 6.5% QoQ at |
245/kg. PAT came in at | 44.4 crore (I-direct estimate: | 51.8 crore) mainly
due to higher interest expense at | 52.8 crore (up 20.7% QoQ).
Highlights of the quarter
ATL’s domestic business witnessed a rather lacklustre performance with
standalone volume remaining flat QoQ (up ~1%). The company is
experiencing a slowdown in the domestic truck segment due to macro
headwinds reducing the pace of industrial activities. The ramping up of
the Chennai facility continues to be strong and averaged 160 TPD in
Q1FY12. It is expected to be ramped up to 200 TPD by Q2FY12 and ~400-
450 TPD by March 2012. In the domestic market, the management has
taken price hikes to the tune of 14% and 10% in the replacement and
OEM market, respectively. On the subsidiary front, South African
operations were dampened by strong Chinese imports. Also, the
company had to shut down cross ply production in its Durban plant,
which would have a negative impact on the overall SA volumes by
~10%. However, the European business outlook remains optimistic with
winter season sales driving growth from the coming quarter.
V a l u a t i o n
Domestic demand outlook on the OEM and truck replacement segments
seem to be slowing down. However, with rubber prices showing signs of
easing, our outlook is positive. At the CMP of | 56, the stock is trading at
9.8x FY13E EPS of | 5.7. Our SOTP price target of | 62 comprises
standalone business value of | 40 (at 7x FY13E EPS) and subsidiary
business value of | 22. We have changed our rating on the stock to BUY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
B l e a k p e r f o r m a n c e … b e lo w e x p e c t a t i o n s …
Apollo Tyres (ATL) announced its Q1FY12 results, which were below our
expectations with disappointing standalone results on the back of margin
shrinkages. ATL reported net sales that were above our expectations at |
1960.8 crore (I-direct estimate: |1681.3 crore), a jump of 74.9% YoY and
11.3% QoQ with management targeting net sales of | 80 billion for FY12.
Consolidated volumes jumped ~34.0% YoY at 1,25,000 tonnes with
Chennai facility averaging at 160 TPD level and expected to ramp up to
400-450 TPD by March 2012. On realisations front, we have seen a QoQ
increase of ~10.5% mainly due to the price hikes undertaken during the
quarter. EBITDA margin performance has been subdued at 8.0% (I-direct
estimate: 9.2%) as average rubber prices for ATL climbed 6.5% QoQ at |
245/kg. PAT came in at | 44.4 crore (I-direct estimate: | 51.8 crore) mainly
due to higher interest expense at | 52.8 crore (up 20.7% QoQ).
Highlights of the quarter
ATL’s domestic business witnessed a rather lacklustre performance with
standalone volume remaining flat QoQ (up ~1%). The company is
experiencing a slowdown in the domestic truck segment due to macro
headwinds reducing the pace of industrial activities. The ramping up of
the Chennai facility continues to be strong and averaged 160 TPD in
Q1FY12. It is expected to be ramped up to 200 TPD by Q2FY12 and ~400-
450 TPD by March 2012. In the domestic market, the management has
taken price hikes to the tune of 14% and 10% in the replacement and
OEM market, respectively. On the subsidiary front, South African
operations were dampened by strong Chinese imports. Also, the
company had to shut down cross ply production in its Durban plant,
which would have a negative impact on the overall SA volumes by
~10%. However, the European business outlook remains optimistic with
winter season sales driving growth from the coming quarter.
V a l u a t i o n
Domestic demand outlook on the OEM and truck replacement segments
seem to be slowing down. However, with rubber prices showing signs of
easing, our outlook is positive. At the CMP of | 56, the stock is trading at
9.8x FY13E EPS of | 5.7. Our SOTP price target of | 62 comprises
standalone business value of | 40 (at 7x FY13E EPS) and subsidiary
business value of | 22. We have changed our rating on the stock to BUY.
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