Apollo Tyres share price tanks 23% so far in 2022; analysts remain bullish, see up to 73% potential rally

Apollo Tyres share price tanks 23% so far in 2022; analysts remain bullish, see up to 73% potential rally

Share price of Apollo Tyres has tanked 23 per cent so far in 2022. However, analysts remain bullish and see up to 73% upside going forward. According to analysts, Apollo Tyres is all geared for the next leg of growth, with sufficient capacity to cater to demand from India and Europe. Though the near-term margin is expected to remain muted, analysts expect gradual margin recovery to sustainable levels from the second half of FY23 owing to the company’s ability to take gradual price hikes. Compared to its peers, Apollo Tyres offers the best blend of earnings growth and cheap valuations, said domestic brokerage firm Motilal Oswal Financial Services in its report. Apollo Tyres shares were quoting at Rs 168, down 4% on NSE intraday.Should you buy Apollo Tyres shares?Motilal Oswal: BuyTarget price: Rs 265; Upside: 51%

Analysts at Motilal Oswal believe that Apollo Tyres is all geared for the next leg of growth, with sufficient capacity to cater to demand from India and Europe. “With capex for Phase II of the AP plant concluding in FY23, increase in capacity utilization will generate higher cash flows and further deleverage its balance sheet. The stock trades at 13.6x/8.7x FY23E/FY24E consolidated EPS. We value the stock at 12x Jun’24E EPS (v/s a five/10 year average P/E multiple of ~16x/12x),” they said. The brokerage maintains a buy call on the stock with a target price of Rs 265 per share, implying 51% upside.

ICICI Securities: BuyTarget price: Rs 305, Upside: 73%

According to ICICI Securities’ analysts, Apollo Tyres is witnessing demand pick-up in tipper, ICV segments, thus pushing T&B tyre demand up. “On ~1,000TPD TBR capacity, present capacity utilisation of ~75% is giving APTY visibility of absorbing growth in FY23-FY24E without investing for incremental capacity in TBR,” they said. The brokerage maintains ‘buy’ rating on the stock with an unchanged DCF-based target price of Rs 305, implying 13x FY24E earnings. Major reduction in RMB cost, improved pricing in TBR replacement, and better-than-expected revenue growth in EU amidst ~17-18% EBITDA margin are the key upside risks to the target.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)