Apollo Tyres surges 6% post Sept quarter result; stock nears record high

Shares of Apollo Tyres hit a multi-year high of Rs 303.40 as it surged 6 per cent on the BSE in Tuesday’s intra-day trade, in an otherwise subdued market, after the company reported a double digit growth in revenue, and earnings before interest, taxes, depreciation, and amortization (Ebitda) in the September quarter (Q2FY23) despite challenging environment.

At 12:11 pm, the stock was trading 4 per cent higher at Rs 297.65, as compared to 0.21 per cent decline in the S&P BSE Sensex. Trading volumes on the counter jumped nearly three-times with a combined 11.87 million shares having changed hands on the NSE and BSE till the time of writing of this report. The stock was trading close to its record high level of Rs 307, touched on April 17, 2018.

In Q2FY23, the company’s consolidated net profit grew 11 per cent year-on-year (YoY) at Rs 194 crore due to higher sales. The tyre major had reported a net profit of Rs 174 crore in the year-ago quarter. Despite adverse environment, it reported 17 per cent YoY increase in revenues at Rs 5,956 crore, largely driven by price increases.

Consolidated Ebitda margin at 12 per cent was down 61 bps YoY, but up 35bps QoQ. Despite cost push, it reported sequential improvement in standalone and Europe operating margin performance.

“Pricing environment remained stable, and the company undertook price increase up to around 5 per cent in replacement segment. In terms of demand outlook, the company is cautiously optimistic. Correction in input prices should help in improving operating margin performance in near to medium term,” the company said.

According to ICICI Securities, Apollo Tyres’ performance in terms of gross margin performance was largely on expected lines. Gross margin declined 80 bps QoQ whereas employee cost & other expense was down 54 bps & 60 bps QoQ, respectively. Ebitda margins on a standalone basis were at 10.3 per cent (up 62 bps QoQ) supported by operating leverage gains amid steady gross margin.

The brokerage firm said they hold a positive view on the company primarily tracking controlled capex spends amid focus on balance sheet health, and capital efficiency.