Apollo Tyres Ltd is riding high on tailwinds from lower input costs. In the September quarter (Q2FY24), consolidated Ebitda margin rose by 160 basis points (bps) sequentially and 650 bps year-on-year to 18.5%. Natural rubber, synthetic rubber and carbon black are the main inputs for tyre makers.
Plus, other expenses were lower by 2% year-on-year. Apollo’s India business performance was comparatively better than that of Europe on both margin and revenue fronts. India business revenue growth was soft at 3.6% year-on-year.
Overall volumes grew by 5% with growth in both OEM and replacement segment in healthy double-digits. But the steep 40% drop in export volumes was a letdown. Apollo maintains that sequentially, there has been a marginal improvement in exports, although the environment in key export markets remains challenging.
In European operations, revenue fell by 6% amid the 7% year-on-year drop in the PCLT (passenger car & light truck) market mainly due to high channel inventory and mild winters. Apollo expects the European business to stay sluggish in the near term and that it will continue to focus on cost containment measures. Overall, the upshot is that Apollo’s consolidated Ebitda jumped by 63% at a time when revenue growth was just 5% at ₹6,280 crore.
Amid a strong outlook for margin, Apollo’s shares have risen by an outstanding 41% in the past one year. The stock trades at about 14 times estimated earnings for FY25, showed Bloomberg data. Notably, margin tailwinds are reversing now.
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