Results Update
Apollo Tyres
CMP: Rs 54 Target: Rs 70 BUY
Steady pace of growth
Apollo Tyres (ATL) has registered revenue growth of 14% YoY during Q3FY08 along with a better-than-expected EBITDA margin (up 270bps YoY to 13.4%). The growth was led by the following – a) robust sale volumes led by demand from the replacement market and b) effective internal cost control measures. PAT has risen 77% YoY, in line with our expectations.
We expect demand from the OEM and replacement markets to sustain the company's volume growth, while its cost cutting programme will continue to offset the pressure exerted by higher rubber costs. Consequently, we have raised our revenue and earnings estimates for FY08E and FY09E. We also introduce our FY10E numbers. We maintain our target price at Rs 70, which represents a potential upside of 30% from current levels, and reiterate a Buy on the stock.
Regards,
Religare Research
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