Apollo Tyres: Margins Aided by Lower Cost of Raw Materials 

Apollo Tyres’ consolidated EBITDA margin at 13.2%, down 113 basis points year-on-year but up 19 basis points QoQ. It was 21 basis points above our estimates, though broadly in line with Bloomberg consensus estimate. Margin was aided by lower RM cost (cost of raw materials), and disciplined cost management, partially negated by inflationary pressures in Europe.  

However, management has indicated for RM costs to ease further in Q2, barring any adverse forex situation. In the standalone segment, replacement and OEM demand continues to grow in single digits, while exports saw a significant decline in Q1.  

The company continues to underperform the industry, also led by loss of market share in OEM PV segment on account of doing selective business, focusing on profitability. Additionally, European operations witnessed negative market growth across all segments, also getting impacted by an inflationary business environment.  

We remain cautious and value the company at 11.5x Jun-27 EPS for a TP of Rs 399 and maintain SELL. 

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Source: HDFC Securities Institutional Equities

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