Even though Apollo Tyres Ltd. released a lackluster set of results for the March 2024 quarter, the company's shares increased during Thursday's trading session. Nonetheless, after management comments, the majority of local and international brokerage companies have a positive opinion of the counter, with several upgrades for the tire manufacturer.
Due to increased expenditures, Apollo Tyres reported a 14% decline in net profit on a year-over-year (YoY) basis for the March 2024 quarter, to Rs 354 crore. For the period under review, operating revenue of Rs 6,258 crore remained largely unchanged. Subject to shareholder approval, the corporate board recommended a dividend of Rs 6 per share for FY24.
Market participants stated that Apollo Tyres reported a decreased profit for the fourth quarter on Tuesday, which was negatively impacted by higher tax charges. With a $11 billion annual revenue, Apollo Tyres is a significant participant in the industry, producing tires for TVS Motor Company, Mahindra & Mahindra, Maruti Suzuki, and other companies.
The share closed Wednesday's last trading session at Rs 474.05
Sales for Q4FY24 are flat year over year and below forecast because of lower-than-expected sales in Europe and India. With double-digit increase in April, the trend did, however, improve. According to Nuvama Institutional Equities, EBITDA increased 3% YoY to Rs 1,030 crore, but fell short of projections because of a provision for extended producer responsibility (EPR) and a revenue shortfall.
"We are cutting the EPS for FY25E and FY26E by 6% and 1%, respectively. With the help of regional sales growth, reduced interest rates, and tax benefits, we are projecting revenue and profit CAGRs of 7% and 17% for FY24–26E. "With a 'buy' rating and a target price of Rs 550, net debt/Ebitda is expected to decrease from 1.1 times in FY24 to 0.5 times in FY26E," the report continued.
Apollo Tyres provides the optimal combination of low valuations, rising capital efficiency, balance sheet deleveraging, and profits growth.Motilal Oswal provided a 'buy' rating and a target price of Rs 550 for the stock, citing the company's persistent discipline in sensible capital allocation and the ensuing improvements in RoCE, which are genuinely impressive. The firm also noted good pricing control.
Kotak Institutional Equities, on the other side, has assigned Apollo Tyres a "sell" rating, citing a fair value of Rs 400. According to Apollo Tyres, the standalone business's lower-than-expected profitability was the reason for the consolidated adjusted EBITDA's 4QFY24 results falling short of projections.
"Although the firm has raised prices to counteract the effects of RM inflation, MRF's competitive pricing will affect the company's overall growth trajectory. Over the medium run, maintaining present profitability would be difficult, Kotak continued.
Antique Stock Broking is still upbeat about the volume rise because of the improving domestic replacement demand, which is mostly being led by Apollo Tyres in the TBR and PCR sectors. "Volume growth should support margins in the EU as a result of the EU's recovery," it stated, retaining its "buy" rating and target price of Rs 591 per share.
Morgan Stanley, one of the international brokerage companies, kept Apollo Tyres at equal weight but kept it on the sidelines by lowering the target price to Rs 472 due to high margins. Apollo Tyres was raised by JP Morgan to 'overweight' with a target price of Rs 555, while Nomura upgraded the company to 'neutral' with a target price of Rs 512.
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