Stock Review: Apollo Tyres

 

Despite the unimpressive standalone performance (reported on July 29) for the June quarter, consequent to a strike at its Perambra (Kerala) facility and higher rubber prices, Apollo Tyres' stock has done well. That's because its global operations (especially Europe) that account for 40 per cent of revenues reported a 55 per cent jump in top line to Rs 704 crore, with sharp improvement in profitability. While rubber prices inched up further in July, the company has already taken price raises which should help sustain margins in the September quarter and improve thereafter, aided by an expected decline in rubber prices.

On the back of healthy demand in India and Europe, Apollo's top line is estimated to grow by 12-15 per cent and earnings by 20-25 per cent in 201112. At Rs 64.30, the stock is available at its five-year average PE and can deliver over 20 per cent return in a year.