Apollo Tyres Ltd. share price target

Apollo Tyres (APTY)’s 1QFY26 consolidated performance was in line with our estimates. However, while standalone performance was much ahead of our estimates, the European business margin was weaker than expected.

Apollo Tyres (APTY) Q1FY26 operating performance broadly was in-line. Standalone margin was better than our estimate (on lower RM basket) but was offset by weak margin performance in EU.

Post underperforming domestic peers in FY25, Apollo Tyres (APTY) is aiming to outgrow peers going ahead. This will be led by corrective measures undertaken in the last couple of quarters with respect to addressing product gaps (adding SKUs), hiring key personnel etc.

APTY’s 4QFY25 earnings, although in line with our estimates, have been below par compared with peers. Consolidated PAT (adjusted for one-offs) declined 42% YoY to INR2.7b (in line) due to a 420bp decline in EBITDA margin to 13% (in line).

Apollo Tyres (APTY) posted a weak 3QFY25, with EBITDA margin down 460bp YoY to 13.7% (vs. est. 14.6%), driven by pressure in the standalone business, although Europe margins improved QoQ.

APTY delivered a steady Q3, with revenue growth accelerating to 5% YoY, surpassing our estimate (by 3%), and driven by strong replacement demand; offset by flattish exports and weak OEM demand.

Apollo Tyres’ (APTY) Q3FY25 standalone EBITDAM was down 100bps QoQ at 11.1% on RM cost increase. EU EBITDA margin increased ~290bps QoQ despite RM price increase, led by higher mix of UHP tires and cost-reduction initiatives.

Apollo (ATL) missed EBITDA margin estimates by 160 bps due to higher-than-expected other expenses and employee cost as slow growth in topline and RM cost pressure on q-o-q basis was expected.

Apollo Tyres’ (APTY) standalone EBITDAM was down 90bps QoQ at 17.2% vs I-Sec estimate of 19.6%, with Q4 being a seasonally strong quarter in terms of demand and raw material basket cost was likely to be favourable. Margin miss was due to i) lower-thanexpected revenue, ii) lower GM and iii) higher other expenses (even after adjusting for EPR provisioning) due to elevated ad/marketing expenses to enhance brand presence in replacement market

Q4 results were soft, with flat revenues, and ~80bps QoQ margin decline to
~17.5% (adj. for ~110bps EPR provision).

Apollo Tyres’ (APTY) standalone Q2FY24 EBITDAM was up 130bps QoQ at 19.1%, driven by scale efficiencies and cost control, with GM only being up 30bps QoQ. Exports, which typically account for ~15% of standalone revenue, saw volume decline of ~40% YoY, although up 7% QoQ.

Apollo Tyres’ (APTY) consolidated Q1 EBITDA was 4% higher than consensus despite revenue falling 3% below estimates, as subdued volumes across India and EU got hidden behind the robust standalone EBITDAM execution of 17.8% (up 190bps QoQ). Exports, which typically account for ~15% of standalone revenue, saw volume decline of ~30% YoY vs EU business volume declining ~9% YoY.

We visited the Andhra Pradesh facility of Apollo Tyres (APTY) and interacted with its management on business outlook and future plans. Following are the key takeaways: 1) Facility with ~350TPD capacity, making TBR and PCR with investment of Rs40bn for phase-1, is built on ~250acres of land and this land can take care of the brownfield expansion till ~1,000TPD.