Shares of Apollo Tyres rose almost 5% to hit their fresh 52-week high of ₹261.70 in intraday trade on BSE on August 17. The stock finally closed 4.02% higher at ₹260.15.
The company announced its June quarter earnings on August 12 which were better than expected. The stock rose 6% in the next trading session.
As highlighted by Motilal Oswal Financial Services, the company's revenue grew 30% year-on-year (YoY) to ₹59.4b against the estimates of ₹55.4b. EBITDA rose 22% YoY to ₹6.9b against the estimates of ₹6b. However, the EBITDA margin contracted 75bp YoY (up 40bp QoQ) to 11.6% still above the estimates of 10.9%. Adjusted PAT grew 48% YoY to ₹1.9b against the estimates of ₹895m in Q1FY23.
Motilal Oswal has a buy call on the stock with a target price of ₹310. It has raised its FY23 and FY24 earnings per share (EPS) by 22% and 11%, respectively, to factor in the price hikes and volume growth in the India business.
"Among its tyre peers, Apollo Tyres offers the best blend of earnings growth and cheap valuations," Motilal Oswal said.
Brokerage firm Emkay Global also has a buy call on the stock with a target price of ₹275.
"We have increased our FY23E-24E EBITDA by 3-5%, mainly due to better gross margin assumptions and cost savings. Following the revision, we expect revenue/EBITDA CAGRs of 15% and 19% over FY22-24E," said the brokerage firm.
"Our positive stance is underpinned by expectations of strong volume growth in both domestic and European regions. Meanwhile, lower-than-expected demand in key geographies, higher competitive intensity, further increase in commodity prices, and adverse currency movements are the key downside risks," Emkay added.
Reliance Securities has also maintained a buy call on the stock with a target price of ₹290.
The brokerage firm attributed the buy call to the anticipated strong volume growth, regular price hikes, healthy export potential, structural positives in European operations and comfortable valuation.
"We expect Apollo Tyres' consolidated revenue to grow in double-digit in FY23E, due to regular price hikes and higher volumes. We expect strong volume traction in FY23-FY24 on the back of production ease for OEMs and a likely revival in replacement demand in CVs," Reliance Securities said.
"We expect the higher export contribution at a favourable exchange rate and price hikes to benefit the company on the revenue front. Therefore, we increase our revenue estimate by 8% and 11% for FY23E and FY24E," the brokerage firm added.
According to a MintGenie poll, an average of 24 analysts have a ‘buy’ call on the stock.
Disclaimer: The views and recommendations are those of individual analysts or broking firms and not of MintGenie.
