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Remarks: We view Apollo Tyres as the best tyre play amongst the Indian listed tyre companies. The company is also the
best diversification story whereby it is now the largest radial manufacturer in the country. It is also a global
tyre play after the acquisition of Vredestien in Europe and of Dunlop in South Africa and derives 23% of its sales
globally.
Europe continues to be the shining spot with the company recording double-digit margins at the EBIT level
helped by strong sales of Vredestien’s branded replacement tyres. Increased sales of Apollo branded tyres in
Europe would provide additional fillip to its profitability.
The company is likely to benefit from an uptick in the domestic commercial vehicle (CV) replacement segment
and increased sales of CV radial tyres. The rupee’s depreciation will see reduced threat from Chinese imports.
Stable material prices, recovery in South African operations and increased proportion of Apollo branded tyres
in the premium European market are likely to improve the margins. At the current market price the stock
trades at a PE multiple of 6.8x discounting its FY2013E earnings. We maintain our Buy with a price target of
Rs86.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Remarks: We view Apollo Tyres as the best tyre play amongst the Indian listed tyre companies. The company is also the
best diversification story whereby it is now the largest radial manufacturer in the country. It is also a global
tyre play after the acquisition of Vredestien in Europe and of Dunlop in South Africa and derives 23% of its sales
globally.
Europe continues to be the shining spot with the company recording double-digit margins at the EBIT level
helped by strong sales of Vredestien’s branded replacement tyres. Increased sales of Apollo branded tyres in
Europe would provide additional fillip to its profitability.
The company is likely to benefit from an uptick in the domestic commercial vehicle (CV) replacement segment
and increased sales of CV radial tyres. The rupee’s depreciation will see reduced threat from Chinese imports.
Stable material prices, recovery in South African operations and increased proportion of Apollo branded tyres
in the premium European market are likely to improve the margins. At the current market price the stock
trades at a PE multiple of 6.8x discounting its FY2013E earnings. We maintain our Buy with a price target of
Rs86.
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