Apollo Tyres (Q4 FY13)

India Infoline News Service | Mumbai |

Slowdown in demand from truck tyres resulted into drop in capacity utilization levels for the company to 75%. Decline of average cost of natural rubber for Q4 FY13 by ~14% on yoy basis led to OPM expansion of 248bps on yoy basis to 12.1%.

CMP Rs94, Target price Rs106, Upside 12.6%

Indian Operations
Apollo Tyres net sales for Q4 FY13 on standalone basis declined by 9.9% yoy primarily on account of volume decline. For FY13, the revenue for the Indian operations witnessed modest 4% growth contributed equally by volume and price increase. Slowdown in demand from truck tyres resulted into drop in capacity utilization levels for the company to 75%. Decline of average cost of natural rubber for Q4 FY13 by ~14% on yoy basis led to OPM expansion of 248bps on yoy basis to 12.1%. Tax charges were substantially higher in Q4 FY13 on account of increase in surcharge from 5% to 10% levied on the entire deferred tax liability. Replacement market accounted for 60% share in product mix for the quarter and the remaining share was contributed by the OEM segment (30%) and exports (10%).

European Operations
Auto industry in Euorpe continued to face challenges with 20%+ decline in volumes for trucks and cars for Q4 FY13. Consequentially tyre market in Europe contracted by 12% yoy.  Revenues for Apollo tyres in the European operations reported 2% growth on you basis on constant currency terms. Lower raw material cost and better product mix translated into 80bps yoy EBIDTA margin expansion on constant currency terms. The company plans to increase its capacity in the Europe by ~20% over the next two years. 

South African Operations
Revenues for the South African operations during Q4 FY13 descended by 9.3% on yoy basis. On the EBIDTA front, the company has managed to report positive margin of 4.5% against marginal loss in Q4 FY12. Company reported an exceptional gain of Rs169mn pertaining to pension liabilities.

Outlook
The demand for the truck tyres, which account for 65% of the revenues for the company in the domestic business, is expected stay sluggish with subdued volumes in CV sales. However, we expect margins for the company to expand with stable raw material prices coupled with increase in share of high margin replacement market. For overseas operation, we believe strong revenue growth in the South African operations and modest growth for Europe. On the margin front, we foresee EBIT margin to remain stable for European operations and expect South African operations to turn EBIT positive in FY14. To strengthen its position in the global market, the company plans to take various initiatives on a) branding and advertising and b) Research and Development. We continue to be bullish on the long term business potential of the company. We maintain our BUY recommendation an upgrade target price to Rs106.

Results table (standalone)
(Rs m) Q4 FY13 Q4 FY12 % yoy Q3 FY13 % qoq
Net sales 20,362 22,590 (9.9) 20,361 0.0
Material costs (13,977) (16,880) (17.2) (14,441) (3.2)
Personnel costs (1,000) (946) 5.6 (1,102) (9.3)
Other overheads (2,925) (2,593) 12.8 (2,766) 5.7
Operating profit 2,461 2,170 13.4 2,051 20.0
OPM (%) 12.1 9.6 248 bps 10.1 201 bps
Depreciation (557) (521) 6.8 (548) 1.6
Interest (629) (749) (16.1) (668) (5.9)
Other income 248 156 59.1 191 29.5
PBT 1,523 1,055 44.3 1,026 48.4
Tax (640) (333) 92.4 (287) 122.8
Effective tax rate (%) 42.0 31.5 - 28.0 -
Reported PAT 883 723 22.1 739 19.5
Adj. PAT margin (%) 4.3 3.2 114 bps 3.6 71 bps
Ann. EPS (Rs) 7.0 5.7 22.1 5.9 19.5
Source: Company, India Infoline Research

Results table (Consolidated)
(Rs m) Q4 FY13 Q4 FY12 % yoy Q3 FY13 % qoq
Net sales 30,378 32,314 (6.0) 32,173 (5.6)
Material costs (17,965) (20,929) (14.2) (20,105) (10.6)
Personnel costs (3,748) (3,023) 24.0 (3,555) 5.4
Other overheads (5,105) (4,759) 7.3 (4,691) 8.8
Operating profit 3,559 3,602 (1.2) 3,822 (6.9)
OPM (%) 11.7 11.1 57 bps 11.9 (16) bps
Depreciation (1,198) (902) 32.8 (919) 30.3
Interest (741) (868) (14.6) (806) (8.0)
Other income 439 263 66.7 268 63.8
Extra ordinary items 169 -
-
PBT 2,227 2,095 6.3 2,364 (5.8)
Tax (816) (515) 58.5 (558) 46.2
Effective tax rate (%) 36.6 24.6 - 23.6 -
Other provisions / minority etc 7 (11) - 0 -
Reported PAT 1,418 1,570 (9.6) 1,806 (21.5)
Adj. PAT margin (%) 4.7 4.9 (19) bps 5.6 (94) bps
Ann. EPS (Rs) 11.3 12.5 (9.6) 14.3 (21.5)
Source: Company, India Infoline Research

Segmented results
(Rs m) Q4 FY13 Q4 FY12 % yoy Q3 FY13 % qoq
Revenues




India 20,362 22,590 (9.9) 20,361 0.0
SA 3,078 3,394 (9.3) 4,056 (24.1)
Europe 7,288 6,774 7.6 8,159
BSE 240.90 [4.10] ([1.67]%)
NSE 240.75 [4.80] ([1.95]%)

***Note: This is a NSE Chart

 

Advertisements

  • Save upto Rs.2.67 lakh with Pradhan Mantri Awas Yojana ...Know more
  • Now Save Rs.3150 on your Demat Account ...Click here
  • Now get IIFL Personal Loan in just 8* hours...APPLY NOW!
  • Get the most detailed result analysis on the web - Real Fast!
  • Actionable & Award-Winning Research on 500 Listed Indian Companies.