Views on Apollo Tyres 3QFY2014 results - Angel Broking

Views of Mr. Yaresh Kothari (Research Analyst - Auto & Auto Ancillary, Angel Broking) on Apollo Tyres 3QFY2014 results:

Apollo Tyres results beats estimates

"For 3QFY2014, Apollo Tyres (APTY) reported better-than-expected consolidated results led by strong performance at Europe and South Africa. While the adjusted top-line was broadly in-line with our expectations; adjusted bottom-line was sharply above our estimates driven by EBITDA margin expansion at Europe and South Africa. The adjusted standalone results, however, missed our estimates due to EBITDA margin pressures on account of substantial increase in other expenditure. During the quarter, the company for the first time recorded other operating income (on a cumulative basis at Rs. 84cr) which relates to VAT and sales tax refunds from the Tamil Nadu government in relation to the Chennai plant. Additionally, the company also reported exceptional expenses in connection with the termination of the Copper acquisition which were netted against profit on sale of certain assets in South Africa.

Consolidated top-line for the quarter grew strongly by 10.6% yoy (3.7% qoq) to Rs. 3,559cr aided by 33.4% and 10.4% yoy growth in Europe and standalone revenues respectively. Nevertheless, standalone revenues were boosted by other operating income of Rs. 84cr; adjusted for which the consolidated top-line was broadly in-line with our estimates of Rs. 3,447cr. Adjusted standalone top-line grew marginally by 5.3% yoy during the quarter. Consolidated EBITDA margins surprised positively and stood at 16%, up 410bp yoy (282bp qoq). Even after adjusting for other operating income, consolidated margins at 13.9% (up 200bp yoy and 70bp qoq) came in ahead of our expectations of 12.2%. The adjusted margin performance was led by sharp improvement in operating performance at Europe and South Africa. However, the standalone adjusted operating margins (reported margins at 13.8%) declined by 256bp qoq to 10.4%, lower than our expectations of 12%, primarily due to significant increase in other expenditure. Driven by better-than-expected operating performance consolidated net profit on an adjusted basis grew strongly by 50.5% yoy (8.9% qoq) to Rs. 272cr, ahead of our expectations of Rs. 189cr. The reported consolidated bottom-line stood at Rs. 338cr, up 87.2% yoy and 54% qoq. The stock rating is currently under review."

Source : Equity Bulls

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