Apollo Tyres Q1 Results Review - Rising Cost Pressure Hurts Margins: Motilal Oswal

Motilal Oswal Report

Apollo Tyres Ltd.’s Q1 FY25 consolidated performance was weak across both the geographies (India and Europe). While sales were largely in line, sharp raw material inflation adversely impacted the profitability, resulting in a lower Ebitda/profit after tax at Rs 9.1 billion/Rs 3.3 billion (estimate: Rs 10.1 billion/4.3 billion).

We cut our FY25E/26E consolidated EPS by 11%/8% to factor in the increase in raw material costs and higher operating expenses. Apollo Tyres’ sustained discipline in prudent capital allocation and subsequent improvement in return on capital employed have been truly commendable.

Apollo Tyres offers the best blend of earnings growth, balance sheet deleveraging, improving capital efficiencies, and cheap valuations.

Given this, we reiterate our Buy rating on Apollo Tyres with a target price of Rs 590 (valued at 17 times June-26E consolidated earnings per share).

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