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W e a k d o m e s t i c o f f t a k e …M a r g i n s b o t t o m i n g o u t
Apollo Tyres (ATL) reported its Q2FY12 results, which were below our
estimates. ATL clocked net sales lower at | 1844.8 crore (I-direct
estimate: | 1961 crore), a jump of 56.9% YoY but down 5.9% QoQ due to
adverse product mix (higher contribution of PCR sales to OEM).
Consolidated volumes jumped ~33% YoY to 120000 tonnes while
standalone volumes surged ~37% on a lower base as Q2FY11 was
impacted by lockout at the Cochin facility. The Chennai plant is operating
at ~250 TPD level and is expected to be ramped up to 450 TPD by FY13E.
EBITDA margins were subdued at 6.8% with average rubber price
remaining firm at |235/kg but are likely to moderate, going forward. RM
costs as proportion to sales touched 77.8% (up 124 bps QoQ) on account
of sticky crude derived input prices. The reported PAT came in at | 22.0
crore indicating a 41.2% YoY decline and a steep 50.6% sequential fall.
Highlights of the quarter
ATL’s domestic business witnessed a subdued quarter with topline
growth impacted by an unfavourable product mix. The quarter saw a
substantial shift in favour of the OEM segment due to higher contribution
of passenger car radial (PCR) tyres. ATL continues to witness a slowdown
in the truck replacement segment on account of multiple macro
headwinds. The cross ply segment registered de-growth while the truck
radial segment has grown nearly 3x on a small base with the industry
radialisation levels touching ~20%. In the domestic front, slower offtake
in the commercial vehicle segment led to an inventory build-up and the
company consequently took production cuts whereas inventory was
higher on a consolidated level in anticipation of higher demand for winter
tyres. ATL took price hikes to the tune of ~2.5% in the TBR segment,
~10% in exports and ~1.5% in domestic OEM segment.
V a l u a t i o n
We maintain our positive outlook on ATL as we expect a better pick-up in
the domestic M&HCV demand in H2FY12E and a correction in rubber
prices from current levels. At the CMP of | 59, the stock is trading at 12.6x
FY13E EPS of | 4.7. Our SOTP price target of | 67 comprises standalone
business value of | 37 (at 8x FY13E EPS), South African subsidiary value
of | 7 (at 1x P/BV) and European subsidiary business value of | 23 at (1.5x
P/BV). We maintain our BUY rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
W e a k d o m e s t i c o f f t a k e …M a r g i n s b o t t o m i n g o u t
Apollo Tyres (ATL) reported its Q2FY12 results, which were below our
estimates. ATL clocked net sales lower at | 1844.8 crore (I-direct
estimate: | 1961 crore), a jump of 56.9% YoY but down 5.9% QoQ due to
adverse product mix (higher contribution of PCR sales to OEM).
Consolidated volumes jumped ~33% YoY to 120000 tonnes while
standalone volumes surged ~37% on a lower base as Q2FY11 was
impacted by lockout at the Cochin facility. The Chennai plant is operating
at ~250 TPD level and is expected to be ramped up to 450 TPD by FY13E.
EBITDA margins were subdued at 6.8% with average rubber price
remaining firm at |235/kg but are likely to moderate, going forward. RM
costs as proportion to sales touched 77.8% (up 124 bps QoQ) on account
of sticky crude derived input prices. The reported PAT came in at | 22.0
crore indicating a 41.2% YoY decline and a steep 50.6% sequential fall.
Highlights of the quarter
ATL’s domestic business witnessed a subdued quarter with topline
growth impacted by an unfavourable product mix. The quarter saw a
substantial shift in favour of the OEM segment due to higher contribution
of passenger car radial (PCR) tyres. ATL continues to witness a slowdown
in the truck replacement segment on account of multiple macro
headwinds. The cross ply segment registered de-growth while the truck
radial segment has grown nearly 3x on a small base with the industry
radialisation levels touching ~20%. In the domestic front, slower offtake
in the commercial vehicle segment led to an inventory build-up and the
company consequently took production cuts whereas inventory was
higher on a consolidated level in anticipation of higher demand for winter
tyres. ATL took price hikes to the tune of ~2.5% in the TBR segment,
~10% in exports and ~1.5% in domestic OEM segment.
V a l u a t i o n
We maintain our positive outlook on ATL as we expect a better pick-up in
the domestic M&HCV demand in H2FY12E and a correction in rubber
prices from current levels. At the CMP of | 59, the stock is trading at 12.6x
FY13E EPS of | 4.7. Our SOTP price target of | 67 comprises standalone
business value of | 37 (at 8x FY13E EPS), South African subsidiary value
of | 7 (at 1x P/BV) and European subsidiary business value of | 23 at (1.5x
P/BV). We maintain our BUY rating on the stock.
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