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http://content.icicidirect.com/mailimages/ICICIdirect_ApolloTyres_Q3FY12.pdf
S t r o n g r e v e n u e g r owt h ; ma r g i n s b o t t omi n g o u t
Apollo Tyres (ATL) reported its Q3FY12 results, which were above our
estimates. The topline came in at | 3228.2 crore (up 36.3% YoY & 12.4%
QoQ) on the back of higher than anticipated revenue growth in the Indian
operations (up 46.1% YoY). ATL’s European operations continued to
witness a robust revenue performance (up 26.3% YoY) driven by strong
winter tyre sales. However, the management has indicated a slowing
down of the same from December onwards due to a milder winter. The
EBITDA margins in Europe jumped to ~18.9% aided by currency
translation benefits. The South African operation revenue were up 27.9%
YoY to | 383.1crore but profits were dented due to a penalty charge of |
29.3 crore (ZAR 45 million) imposed by the SA competition commission.
Consolidated tonnage sales jumped ~21.5% YoY to 130,000 tonnes.
EBITDA margins were subdued at 10.0% (down 149bps YoY) due to
elevated rubber prices (| 210/kg) and higher crude derived commodity
prices. PAT came in at | 98.0 crore (up 26.0% QoQ but down 18.7% YoY).
Highlights of the quarter
ATL’s domestic volumes surged 24% YoY driven by demand pick-up in
the truck/bus radial (TBR) tyres coupled with incremental volumes
through ramp-up at the Chennai facility (operating at 275 TPD level and
expected to be ramped up to 450 TPD by Q2FY13E). The OEM
contribution has increased to 33%; replacement contributes 57% and
exports 10%. The European facility is operating at optimum capacity.
Fresh capacity addition is unlikely except for increased exports of the
‘Apollo Tyre” brand from Indian operations. The quarter witnessed a drop
in imports of Chinese tyres by ~15% sequentially on account of rupee
depreciation making them costlier. ATL took price hikes of ~1.0% in India
and ~3% in South Africa with no price hikes in Europe.
V a l u a t i o n
We maintain our optimistic stance on ATL driven by a robust revenue
performance across geographies coupled with margin expansion driven
by expectation of rubber prices cooling off from current levels. At the
CMP of | 76, the stock is trading at 10.5x FY12E EPS of | 7.2 and 6.9x
FY13E EPS of | 10.8. We have valued the stock at 8.0x FY13E EPS of
| 10.8 to arrive at a target price of | 86 implying a potential upside of
13%. We maintain our BUY rating on ATL.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_ApolloTyres_Q3FY12.pdf
S t r o n g r e v e n u e g r owt h ; ma r g i n s b o t t omi n g o u t
Apollo Tyres (ATL) reported its Q3FY12 results, which were above our
estimates. The topline came in at | 3228.2 crore (up 36.3% YoY & 12.4%
QoQ) on the back of higher than anticipated revenue growth in the Indian
operations (up 46.1% YoY). ATL’s European operations continued to
witness a robust revenue performance (up 26.3% YoY) driven by strong
winter tyre sales. However, the management has indicated a slowing
down of the same from December onwards due to a milder winter. The
EBITDA margins in Europe jumped to ~18.9% aided by currency
translation benefits. The South African operation revenue were up 27.9%
YoY to | 383.1crore but profits were dented due to a penalty charge of |
29.3 crore (ZAR 45 million) imposed by the SA competition commission.
Consolidated tonnage sales jumped ~21.5% YoY to 130,000 tonnes.
EBITDA margins were subdued at 10.0% (down 149bps YoY) due to
elevated rubber prices (| 210/kg) and higher crude derived commodity
prices. PAT came in at | 98.0 crore (up 26.0% QoQ but down 18.7% YoY).
Highlights of the quarter
ATL’s domestic volumes surged 24% YoY driven by demand pick-up in
the truck/bus radial (TBR) tyres coupled with incremental volumes
through ramp-up at the Chennai facility (operating at 275 TPD level and
expected to be ramped up to 450 TPD by Q2FY13E). The OEM
contribution has increased to 33%; replacement contributes 57% and
exports 10%. The European facility is operating at optimum capacity.
Fresh capacity addition is unlikely except for increased exports of the
‘Apollo Tyre” brand from Indian operations. The quarter witnessed a drop
in imports of Chinese tyres by ~15% sequentially on account of rupee
depreciation making them costlier. ATL took price hikes of ~1.0% in India
and ~3% in South Africa with no price hikes in Europe.
V a l u a t i o n
We maintain our optimistic stance on ATL driven by a robust revenue
performance across geographies coupled with margin expansion driven
by expectation of rubber prices cooling off from current levels. At the
CMP of | 76, the stock is trading at 10.5x FY12E EPS of | 7.2 and 6.9x
FY13E EPS of | 10.8. We have valued the stock at 8.0x FY13E EPS of
| 10.8 to arrive at a target price of | 86 implying a potential upside of
13%. We maintain our BUY rating on ATL.
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