EQUITY RESEARCH

REPORT ON APOLLO
TYRES

Submitted by
GROUP 26
LAKSHMIPRIYA PGDMB17-073
KULKARNI ARNAV PGDMB17-071
KANCHAN GUPTA PGDMB17-065
PARIKSHIT PAL PGDMB17-094
Apollo Tyres 15th Sept. 2017
NSE: APOLLOTYRE | Sector: TYRES

|Rating: Buy
CMP : Rs. 255 |Target Price: Rs.274

BUSINESS BACKGROUND
KEY DATA

Apollo Tyres Ltd is the world's 17th biggest tyre manufacturer, with FACE VALUE RS 1
annual consolidated revenues of Rs. 140.53 billion (US$2.09 billion) in
March 2017. It was founded in 1972. Its first plant was commissioned DIVD YIELD % 1.16%
in Perambra, Thrissur,Kerala, India.
52 WK HI/LOW 288.45/171.60
The company now has four manufacturing units in India, 1 in
Netherlands and 1 in Hungary. It has a network of nearly 5,000 NSE CODE APOLLOTYRE
dealerships in India, of which over 2,500 are exclusive outlets. FREE FLOAT
It gets 69% of its revenues from India, 26% from Europe and 5% from MARKET CAP Rs.7395.72 Cr
other geographies.
Apollo announced its entry into the two-wheeler tyre segment with
contract manufacturing in March 2016. In November 2016, the company SHAREHOLDING PATTERN
signed a MoU with the Government of Andhra Pradesh to set up a new
factory in Andhra Pradesh to manufacture tyres for two-wheelers and Promoters 45.09%
pick-up trucks.
Banks, MF,NBFC,DIIs 19.49%
The companys second plant in Europe, was inaugurated by the FIIs 27.20%
Hungarian Prime Minister, Viktor Orban, on April 2017. Government 2.01%
Others 6.21%
Total 100.00%

INVESTMENT HIGHLIGHTS

Q1 (JUNE) FY18 Results:

In Q1FY18, Revenue of the company has registered decline from
Rs.269.45 Crs. in Q4FY17 to Rs.257.98 Crs. in Q1FY18. The company
registered EBITDA of Rs.20.90 Crs. in Q1FY18 vs Rs.32.37 Crs. in
Q4FY17.PAT of the company registered in is Rs.6.71 Crs. Vs Rs.1.76
Crs. in Q1FY18. (All figures are on standalone basis and unaudited for
Q1FY18)
TYRE INDUSTRY: WHEELING AROUND

The Indian tyre industry is ancillary to the automobile industry. Indian Tyre Industry is in modernization phase and
is largely driven by demand and supply conditions. Demand swings in any of the auto segments (Commercial
vehicles, cars, two-wheelers) have an impact on the tyre demand.
The domestic industry essentially caters to 2 segments (1) Original Equipment manufacturers (OEM); (2)
Replacement market (Aftermarket). Replacement demand dominates the tyre market contributing 56%of total size
while the OEM market share is 44%as of 2015-16.
Indian tyre market is driven largely by two & three wheeler tyres (53%), followed by passenger cars (28%) and
commercial vehicle segments (16%). Tractor segment accounted for only 3% of the tyre sales in 2015-16.
There were 39 companies (2014-15) in the domestic tyre industry as per ATMA and the industry is valued at around
535 billion as of 2015-16 with the top 10 companies accounting for 85-90% of the market share.

TYRE PRODUCTION:

Indian tyre industry is highly competitive with the presence

of a large number of global and Indian auto-companies.
However, top 10 companies account for about 80% of the
market share. Tyres production (in volume terms) increased
only marginally by about 4% in 2015-16 after increasing by
about 13% in the preceding year.

MARGIN OF TYRE PLAYERS:

The top 10 players account for about 80% market

share in the domestic tyre industry. Raw materials
prices impact the margins of players as the raw
material cost accounts for about 65-70% of total.
Raw material prices have declined on a y-o-y basis
over the past two years. As a result, tyre players have
been able to report strong growth in the margins
KEY FUNDAMENTALS:

Apollo JK Tyres and Goodyear

Particulars Tyres MRF Ltd. Ceat Tyres Industries Ltd. India Ltd. Average
Liquidity Ratios
Current Ratio 1.10 1.61 0.99 1.05 2.30 1.41
Quick Ratio 0.50 1.07 0.49 0.71 1.82 0.92

Solvency Ratios
Debt-to-asset ratio 0.46 0.43 0.52 0.80 0.36 0.51
Debt-to-capital ratio 0.14 0.13 0.96 0.63 0.00 0.37
Debt equity ratio 0.16 0.14 26.86 1.69 0.00 5.77

Profitability Ratios
Gross profit margin 46.46% 47.91% 48.44% 51.57% 64.75% 0.52
Operating profit
margin 11.83% 15.68% 8.72% 9.41% 12.23% 0.12
Net profit margin 8.09% 9.84% 5.65% 5.03% 7.83% 0.07
Return on Assets 8.12% 9.70% 1204.95% 3.11% 11.56% 2.47
Return on Capital
Employed % 16.83% 22.05% 2553.52% 9.15% 26.57% 5.26
Return on Net
Worth % 15.06% 16.98% 148218.93% 15.74% 18.01% 296.57

FINANCIALS:

Year 2017 2018E 2019E 2020E

Sales 99236.89 101406.55 103623.65 105889.22
COGS -53132.29 -51257.33 -52377.99 -53523.15
SGA -34019.16 -34272.18 -35021.49 -35787.18
Depreciation -2881.99 -2881.99 -2881.99 -2881.99
Taxable Income 9203.45 12995.05 13342.18 13696.90
Tax -3185.31 -4497.59 -4617.73 -4740.50
NOPAT 6018.14 8497.47 8724.45 8956.40
Operating CF 8900.13 11379.46 11606.44 11838.39
Working capital 2722.67 2782.19 2843.02 2905.18
Change in working capital -44.87 -59.53 -60.83 -62.16
Capital Expenditure -2881.99 -2881.99 -2881.99 -2881.99
Free cash flows 5973.27 8437.94 8663.62 8894.24

REFERENCES:
http://www.careratings.com/upload/NewsFiles/SplAnalysis/Tyre%20industry%20April
%202017.pdf

https://www.apollotyres.com/en-in/car-suv-van/tyre-finder/

https://www.nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuote.jsp?
symbol=APOLLOTYRE&illiquid=0&smeFlag=0&itpFlag=0

https://s3.eu-central-1.amazonaws.com/apolloproducts/3985/unaudited-financial-results-june-
30-2017.pdf