Buy Apollo Tyre - Dolat Capital

- The company has had a consistent performance amidst volatile market conditions. Its net sales grew at 26.9% CAGR over last five years. It reported its EBITDA growth at 18.2% CAGR over last 5 years. We expect its revenue to grow at a CAGR of 11%over FY12-14 and EBIDTA to grow at 16% CAGR.

- The company has an extensive distribution network both in India and Europe. It has ~4,000 retail dealers in India and ~3,100 outlets in Europe.

- Apollo's market share has been consistent over the last few years. It holds top position in Truck and LCV segments with ~27% market share. It currently stands third in passenger car segment with 17% share (leader being MRF and Bridgestone).

- On the demand front, the company asserted that OEM demand has slowed down in the passenger car segment. The commercial vehicle tyre demand continues to be stable. However, demand continues to be robust in the replacement market.

- On the margin front, the shift from OEM to replacement market will definitely improve its margins. Currently ~72% of its total sales are in the replacement market.

- The stock currently trades at 6.5x FY14E. We recommend BUY.

Source : Equity Bulls

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