Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Apollo Tyres (APTY)
Automobiles
India business disappoints; margin outlook positive. Apollo Tyres’ 2QFY12 results
were below estimates led by subdued India business even as margins (EBIT) expanded
qoq for foreign subsidiaries. Domestic margins (EBITDA) declined qoq (120 bps) as (1)
sales mix shifted in favor of OEs and (2) volumes declined by 10% qoq. Going forward,
outlook on margins is positive as raw material prices have softened. Retain BUY with a
target price of Rs80 (Rs85 earlier).
Below estimates – led by India business; international subsidiaries show qoq improvement
Apollo Tyres reported 2QFY12 sales (consolidated) at Rs28.7 bn (+47% yoy; +1.7% qoq).
Reported EBITDA at Rs2.3 bn (+25% yoy;-4% qoq) was subdued as EBITDA margins declined (-
150 bps yoy; -50 bps qoq). Reported 2QFY12 PAT at Rs781 mn (+47% yoy; +1.2% qoq) was
boosted by other income component of Rs118 mn. Negative surprise was led by the standalone
business as EBITDA margins declined 120 bps qoq (-350 bps yoy) to 6.8% in 2QFY12 as (1)
proportion of OE sales increased (yoy) from 25% to 34% of the standalone sales mix in 2QFY12
led by higher proportion of sales in the PCR segment (50% OE/replacement ratio) and higher sales
of TBRs to OEs, and (2) proportion of truck/bus tyres in the sales mixes increased (yoy) from 60%
to 63% in 2QFY12. International subsidiaries showed sequential improvement in margins (EBIT) in
2QFY12.
Net debt has increased sequentially in the two prior quarters; primarily working capital
Net debt of the company has increased sequentially in each of the prior two quarters. Net debt
increased to Rs28 bn in 1QFY12 (from ~Rs23 bn in FY2011) and increased further to Rs32 bn in
2QFY12. Most of the increase is on account of higher working capital. In the current quarter, the
company has increased inventory in Europe to prepare for peak sales in 3QFY12E.
Outlook positive on margins; working capital to reduce in 3QFY12E
As per the management, benefits on account of lower raw material prices would start flowing
from 4QFY12E onwards in all the geographies. EBITDA per kg for the consolidated business at
Rs19 in 2QFY12 is the lowest in the last two years and would normalize (increase) as inflationary
pressure on the raw material front is already gone. Also, working capital should reduce by the end
of 3QFY12E as inventories in Europe decline in the peak sales quarter.
Reducing our earning estimates; retain BUY with a revised target price of Rs80 (Rs85 earlier)
We have reduced our earning estimates (PAT) by 11%, 6% and 1% for FY2012E, FY2013E and
FY2014E, respectively. We retain our BUY rating with a target price of Rs80 (Rs85 earlier) at 8.5X
(average multiple from FY2002-11) FY2013E EPS.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Apollo Tyres (APTY)
Automobiles
India business disappoints; margin outlook positive. Apollo Tyres’ 2QFY12 results
were below estimates led by subdued India business even as margins (EBIT) expanded
qoq for foreign subsidiaries. Domestic margins (EBITDA) declined qoq (120 bps) as (1)
sales mix shifted in favor of OEs and (2) volumes declined by 10% qoq. Going forward,
outlook on margins is positive as raw material prices have softened. Retain BUY with a
target price of Rs80 (Rs85 earlier).
Below estimates – led by India business; international subsidiaries show qoq improvement
Apollo Tyres reported 2QFY12 sales (consolidated) at Rs28.7 bn (+47% yoy; +1.7% qoq).
Reported EBITDA at Rs2.3 bn (+25% yoy;-4% qoq) was subdued as EBITDA margins declined (-
150 bps yoy; -50 bps qoq). Reported 2QFY12 PAT at Rs781 mn (+47% yoy; +1.2% qoq) was
boosted by other income component of Rs118 mn. Negative surprise was led by the standalone
business as EBITDA margins declined 120 bps qoq (-350 bps yoy) to 6.8% in 2QFY12 as (1)
proportion of OE sales increased (yoy) from 25% to 34% of the standalone sales mix in 2QFY12
led by higher proportion of sales in the PCR segment (50% OE/replacement ratio) and higher sales
of TBRs to OEs, and (2) proportion of truck/bus tyres in the sales mixes increased (yoy) from 60%
to 63% in 2QFY12. International subsidiaries showed sequential improvement in margins (EBIT) in
2QFY12.
Net debt has increased sequentially in the two prior quarters; primarily working capital
Net debt of the company has increased sequentially in each of the prior two quarters. Net debt
increased to Rs28 bn in 1QFY12 (from ~Rs23 bn in FY2011) and increased further to Rs32 bn in
2QFY12. Most of the increase is on account of higher working capital. In the current quarter, the
company has increased inventory in Europe to prepare for peak sales in 3QFY12E.
Outlook positive on margins; working capital to reduce in 3QFY12E
As per the management, benefits on account of lower raw material prices would start flowing
from 4QFY12E onwards in all the geographies. EBITDA per kg for the consolidated business at
Rs19 in 2QFY12 is the lowest in the last two years and would normalize (increase) as inflationary
pressure on the raw material front is already gone. Also, working capital should reduce by the end
of 3QFY12E as inventories in Europe decline in the peak sales quarter.
Reducing our earning estimates; retain BUY with a revised target price of Rs80 (Rs85 earlier)
We have reduced our earning estimates (PAT) by 11%, 6% and 1% for FY2012E, FY2013E and
FY2014E, respectively. We retain our BUY rating with a target price of Rs80 (Rs85 earlier) at 8.5X
(average multiple from FY2002-11) FY2013E EPS.
No comments:
Post a Comment