Apollo Tyres Ltd. share price target

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.

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.

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 (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.

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

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

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.

Apollo Tyres’ (ATPY) Q4FY23 standalone EBITDA margin at 16% (up 300bps QoQ) was driven by 8% QoQ decline in raw material basket (RMB) costs, improved sales mix and cost controls. EU EBIDTA margin at ~18% was up 270bps QoQ driven by lower RM prices, decline in power/freight costs and further increase in mix of UHP/all-season tyres.