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APOLLO TYRES – Short Term Investments

APOLLO TYRES
Reco price: Rs 55
Current market price: 52.50
Target price: Rs 61
Upside: 16.2%
Brokerage: IIFL Research

Apollo Tyres’ September quarter results were above expectation with standalone sales up 24 per cent year-on-year (y-o-y) and net profit up 12 times due to volume growth of 24 per cent y-o-y on the back of strong demand from replacement and OEM segments. Sequentially, volumes were up by 4 per cent. The brokerage expects a volume growth of 12 per cent in 2009-10 on account of improving demand and due to lower base effect.

The y-o-y fall in raw material prices has caused a marked expansion in EBITDA margin in the September quarter. These are expected to expand substantially y-o-y in the next two quarters. Demand has revived for the South Africa-based Dunlop (a 100 per cent subsidiary of Apollo Tyres) in the September 2009 quarter, after a poor performance in June quarter. This helped Dunlop post profit of Rs 11.6 crore in September quarter as against a loss of Rs 20.9 crore in June quarter. Netherlands-based Vredestein, which was acquired by Apollo in the June quarter, reported Rs 550 crore sales, EBIDTA margins of 11 per cent and PAT margin of 2 per cent for September quarter. The brokerage has raised its 2009-10 and 2010-11 earnings estimates for Apollo Tyres by 10 per cent to reflect higher volume growth.

This entry was posted on Sunday, October 25th, 2009 at 6:51 pm and is filed under Short Term Investments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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