Views on Apollo Tyres results - Angel Broking

Views of Mr. Yaresh Kothari (Research Analyst – Automobile, Angel Broking) on Apollo Tyres results

- Apollo Tyres results beats estimates

Apollo Tyres 4QFY2014 Result Review (CMP: Rs 177/ TP: Under review/ Recommendation: Under review)

"Apollo Tyres (APTY) reported extremely strong performance for 4QFY2014, beating consensus as well as our expectations by a wide margin. Though the top-line performance was broadly in-line with our expectations; bottom-line surged sharply led by impressive growth in European operations and aided by lower-than-expected tax rate.

Consolidated top-line for the quarter grew 6.2% yoy to Rs 3,229cr aided by 44.9% and 8% yoy growth in Europe and standalone revenues respectively. The strong growth in European operations was led by volume growth of ~13% yoy, net average realization growth of ~5% yoy and further boosted by the INR depreciation against the Euro. For Indian operations, volumes grew at a healthy rate of ~6% yoy; while net average realization increased by ~2% yoy during the quarter. South Africa revenues however, declined 53.3% yoy as the company sold-off its passenger car tyre plant during 3QFY2014. Consolidated EBITDA margins surprised positively and stood at 14.3%, up 244bp yoy, driven by sharp improvement in operating performance at Europe. EBITDA margins at international operations increased substantially by 835bp yoy to 19.3%; while, margins at Indian operations stood almost flat at 12%. The company continued to enjoy the benefits of lower natural rubber prices and also benefitted from superior product-mix. Led by a strong operating performance, EBITDA surged 28.1% yoy to Rs 461cr. Driven by better-than-expected operating performance and lower-than-expected tax rate (13.9% as against 17.6% in 3QFY2014), consolidated net profit grew strongly by 117.9% yoy to Rs 271cr, significantly ahead of our expectations of Rs 209cr.

Meanwhile, the company's board has given its approval to set up a Greenfield facility in Eastern Europe at an approximate cost of €500mn which would be spent over the next four years. The company is currently operating at ~90% utilization levels in Europe and in the near term expects to meet the additional demand from India. We maintain our positive view on the company. Our rating and target price are currently under review."

Source : Equity Bulls

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