BUY CMP 169.95 Target Price 204.00 APOLLO TYRES LIMITED Result Update (PARENT BASIS): Q1 FY15 AUGUST 22 nd, 2014 ISIN: INE438A01022 Stock Data Sector Tyres & Tubes BSE Code 500877 Face Value 1.00 52wk. High / Low (Rs.) 214.80/59.55 Volume (2wk. Avg ) 411000 Market Cap ( Rs in mn ) 86519.85 Annual Estimated Results (A*: Actual / E*: Estimated) Years FY14A FY15E FY16E Net Sales 87117.32 94086.71 101613.64 EBITDA 11781.48 12569.93 13575.52 Net Profit 4426.19 5647.97 6365.41 EPS 8.78 11.09 12.50 P/E 19.36 15.32 13.59 Shareholding Pattern (%) 1 Year Comparative Graph APOLLO TYRES LTD S&P BSE SENSEX Highlights Apollo Tyres Ltd manufactures and sells automotive tires, tubes, and flaps in India, South Africa, and Europe. Net Sales of Apollo Tyres Ltd rose by 6.55% at Rs. 23065.34 mn in Q1 FY15 compared to Rs. 21647.06 mn in Q1 FY14. Net profit rose by 48.61% from Rs. 935.67 mn in Q1 FY14 to Rs. 1390.52 mn in Q1 FY15. During the quarter, EBIDTA also rose by 18.21% at Rs. 3097.41 mn against Rs. 2620.20 mn in Q1 FY14. Other income rose by 171.28% from Rs. 79.95 mn to Rs. 216.89 mn in the current June quarter. PBT increased by 42% at Rs. 1978.49 mn against Rs 1393.28 mn in Q1 FY14. EBIDTA and Net Profit margins rose by 133 and 170 basis points respectively in current June quarter of FY 204-15. During Q1 FY15, Consolidated net profit was Rs. 2279.43 mn as compared to Rs. 1659.47 mn Q1 FY14, grew by 37.36%. Consolidated Total Income has increased from Rs. 32009.40 mn for the quarter ended June 30, 2013 to Rs. 32765.32 mn for the quarter ended June 30, 2014. Net Sales and PAT of the company are expected to grow at a CAGR of 6% and 27% over 2013 to 2016E respectively. Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Apollo Tyres Ltd 169.95 86519.85 8.78 19.36 3.14 75.00 Ceat Ltd 587.50 21138.40 67.35 8.73 2.12 100.00 JK Tyre & Industries Ltd 294.55 12094.00 33.88 8.69 1.38 50.00 MRF Ltd 24225.00 103072.50 1803.95 13.47 2.83 250.00
Company Profile Apollo Tyres Ltd, with its corporate headquarters in Gurgaon, India, is in the business of manufacture and sale of tyres since its inception in 1972. Over the years, the company has grown manifold, establishing its footprint across the globe. The company has manufacturing presence in Asia, Europe and Africa, and exports to over 100 countries. Popular brands of the company Apollo, Dunlop and Vredestein, offer a comprehensive product portfolio spread across passenger car, light truck, truck-bus, off highway and bicycle tyres, retreading material and retreaded tyres. The company has plants in Perambra, Kerala, Vadodara, Gujarat and Pune. It is the second largest tyre manufacturer in India with a total installed capacity of 250,000 million TPA, over 16000 employees, and 9 manufacturing facilities across 3 continents & 6 key brands. The company s joint venture with Michelin, France for producing dual branded truck & bus radial tyres in India is the market leader in the category. The company is in technical collaboration with General Tire International Company USA and produces some of India`s most advanced tyres for trucks, tractors, light commercial vehicles and cars. Mahindra and Mahindra and TAFE are its major OEM clients. Apollo Tyre Company has subsidiaries, such as Apollo Tyres AG (Switzerland), Tyres Kft (Hungary), Apollo Tyres GmbH (Germany), Apollo (Mauritius) Holdings Pvt. Ltd, Apollo Tyres Pte Ltd. (Singapore), Apollo Automotive Tyres Ltd, Apollo Radial Tyres Ltd to name a few. QUARTERLY RESULTS (PARENT BASIS) Q1 FY15 Rs.In Mn Q1 FY15 Q1 FY14 % Change Net Sales 23065.34 21647.06 6.55% Net Profit 1390.52 935.67 48.61% Net Profit Margin 6.02% 4.32% 170 BP EBIDTA 3097.41 2620.20 18.21% EBITDA Margin 13.43% 12.10% 133 BP Other Income 216.89 79.95 171.28% PBT 1978.49 1393.28 42.00% Net Sales of Apollo Tyres Ltd rose by 6.55% at Rs. 23065.34 mn in Q1 FY15. Net profit rose by 48.61% from Rs. 935.67 mn in Q1 FY14 to Rs. 1390.52 mn in Q1 FY15. EBIDTA also rose by 18.21% at Rs. 3097.41 mn against Rs. 2620.20 mn in Q1 FY14. Other income rose by 171.28% from Rs. 79.95 mn to Rs. 216.89 mn in the current June quarter. PBT increased by 42% at Rs. 1978.49 mn against Rs 1393.28 mn in Q1 FY14. EBIDTA and Net Profit margins rose by 133 and 170 basis points respectively in current June quarter of FY 204-15.
Break Up of Expenditure Particulars (Rs. Mn) Q1 FY15 Q1 FY14 CHNG % Cost of Materials 14512.76 14635.30-1% Emplye Benefit Exp. 1474.70 1146.20 29% Dep. & Amortz. Exp 606.07 593.97 2% Other Expenses 3297.22 3035.39 9% Stock-in-trade 635.16 643.11-1% Consolidated Results The Consolidated results for the Quarter ended June 30, 2014 The Group has posted a net profit after taxes, minority interest and share in profit/(loss) of associates of Rs. 2279.43 million for the quarter ended June 30, 2014 as compared to Rs. 1659.47 million for the quarter ended June 30, 2013. Total Income has increased from Rs. 32009.40 million for the quarter ended June 30, 2013 to Rs. 32765.32 million for the quarter ended June 30, 2014. The EBITDA margin for the quarter was at Rs. 4.3 billion at 13.3%, improved by almost a percent over the same period last year led by improvement in margin in the India operations.
FINANCIAL STATEMENTS & ESTIMATIONS (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance sheet as on 31 st March, 2013-2016E APOLLO TYRES LTD FY-13A FY-14A FY-15E FY-16E SOURCES OF FUNDS Shareholder's Funds Share Capital 504.09 504.09 509.09 509.09 Money Received against Share Warrants 107.75 107.75 0.00 0.00 Reserves and Surplus 22802.39 26786.32 31571.02 36306.67 Total Net worth (a) 23414.23 27398.16 32080.11 36815.76 Non Current Liabilities Long term borrowing 13383.68 7137.33 5995.36 5275.91 Deferred Tax Liability (net) 3518.40 3909.45 4183.11 4392.27 Other Long term Liabilities 124.10 129.73 137.51 144.39 Total Non Current Liabilities (b) 17026.18 11176.51 10315.98 9812.57 Current Liabilities Short term borrowings 5394.15 1806.73 1535.72 1290.01 Trade payables 6000.24 8983.41 10151.25 11064.87 Other Current Liabilities 4914.33 8907.38 10067.07 11073.78 Short term Provisions 1911.63 2847.82 3388.91 3829.46 Total Current Liabilities (c) 18220.35 22545.34 25142.95 27258.11 Total Liabilities (a + b + c) 58660.76 61120.01 67539.04 73886.44 APPLICATION OF FUNDS Non-Current Assets Fixed Assets Tangible assets 30633.90 32421.61 35015.34 37466.41 Intangible assets 79.64 114.21 131.34 147.10 Capital Work in Progress 2489.73 349.71 384.68 415.46 Sub Total - Fixed Assets 33203.27 32885.53 35531.36 38028.97 Non Current Investments 6126.95 6514.64 6840.37 7113.99 Long Term loans and advances 1689.94 1230.38 1353.42 1461.69 Total Non Current Assets (d) 41020.16 40630.55 43725.15 46604.65 Current Assets Inventories 11208.26 12836.92 14634.09 16516.09 Trade receivables 3020.06 2405.45 2694.10 2963.51 Cash and Bank Balances 1541.92 2211.10 2785.99 3398.90 Short-terms loans & advances 1869.66 2445.80 3032.79 3669.68 Other current assets 0.70 590.19 666.91 733.61 Total Current Assets (e) 17640.60 20489.46 23813.89 27281.79 Total Assets (d+e) 58660.76 61120.01 67539.04 73886.44
Annual Profit & Loss Statement for the period of 2013 to 2016E Value(Rs.in.mn) FY13A FY14A FY15E FY16E Description 12m 12m 12m 12m Net Sales 85074.91 87117.32 94086.71 101613.64 Other Income 573.77 792.26 903.18 975.43 Total Income 85648.68 87909.58 94989.88 102589.07 Expenditure -76093.05-76128.10-82419.95-89013.55 Operating Profit 9555.63 11781.48 12569.93 13575.52 Interest -2609.73-2446.10-2274.87-2138.38 Gross profit 6945.90 9335.38 10295.05 11437.14 Depreciation -2200.71-2480.46-2703.70-2892.96 Exceptional Items 0.00-710.47 0.00 0.00 Profit Before Tax 4745.19 6144.45 7591.35 8544.18 Tax -1619.91-1718.26-1943.39-2178.77 Profit After Tax 3125.28 4426.19 5647.97 6365.41 Equity capital 504.09 504.09 509.09 509.09 Reserves 22771.17 26755.10 31571.02 36306.67 Face value 1.00 1.00 1.00 1.00 EPS 6.20 8.78 11.09 12.50 Quarterly Profit & Loss Statement for the period of 31 st Dec, 2013 to 30 th Sep, 2014E Value(Rs.in.mn) 31-Dec-13 31-Mar-14 30-Jun-14 30-Sep-14E Description 3m 3m 3m 3m Net sales 22277.61 22124.17 23065.34 22142.73 Other income 421.20 132.99 216.89 227.73 Total Income 22698.81 22257.16 23282.23 22370.46 Expenditure -19206.33-19476.95-20184.82-19319.53 Operating profit 3492.48 2780.21 3097.41 3050.93 Interest -634.57-563.67-512.85-476.95 Gross profit 2857.91 2216.54 2584.56 2573.98 Depreciation -649.22-627.83-606.07-624.25 Exceptional Items -548.00-112.47 0.00 0.00 Profit Before Tax 1660.69 1476.24 1978.49 1949.73 Tax -557.66-180.00-587.97-526.43 Profit After Tax 1103.03 1296.24 1390.52 1423.30 Equity capital 504.09 504.09 509.09 509.09 Face value 1.00 1.00 1.00 1.00 EPS 2.19 2.57 2.73 2.80
Ratio Analysis Particulars FY13A FY14A FY15E FY16E EPS (Rs.) 6.20 8.78 11.09 12.50 EBITDA Margin (%) 11.23% 13.52% 13.36% 13.36% PBT Margin (%) 5.58% 7.05% 8.07% 8.41% PAT Margin (%) 3.67% 5.08% 6.00% 6.26% P/E Ratio (x) 27.41 19.36 15.32 13.59 ROE (%) 13.43% 16.24% 17.61% 17.29% ROCE (%) 27.96% 39.39% 38.56% 37.96% Debt Equity Ratio 0.81 0.33 0.23 0.18 EV/EBITDA (x) 10.77 7.84 7.26 6.61 Book Value (Rs.) 46.17 54.08 63.01 72.32 P/BV 3.68 3.14 2.70 2.35 Charts
Industry Overview According to the Society of Indian Automobile Manufacturers, the auto industry registered limited growth, with passenger vehicle sales growing by 4.6% and commercial vehicle sales growing by 18.2% - the later being driven by a demand boost in the light commercial vehicle category. In the past fiscal, according to the Automotive Tyre Manufacturers Association, the Indian tyre industry, which closely mirrors prevailing sentiments in the automotive sector, is estimated to have clocked a turnover of around Rs. 300 billion, with exports accounting for Rs 36 billion. Dominated by few large manufacturers, the total production was recorded at around 1.5 million metric tonnes. The commercial vehicle tyre segment grew by a marginal 3% over the previous year, in terms of units produced. Largely gaining from an increase in profitability of fleet owners due to a multitude of factors ranging from ability to pass on increased fuel cost to consumers and better efficiencies in operations. The light commercial vehicle and industrial tyre segments registered maximum growth, with both growing a healthy 11%. The light commercial vehicle segment benefitted hugely from the spike in small commercial vehicle sales. The Indian tyre industry, in comparison to its western counterparts, lags behind in radicalization trends. Radicalization levels for passenger vehicle tyres were maintained at 98%, while for commercial vehicle segment it was pegged at 22% a significant growth of nearly 25%over last year. The top 5 players Apollo, Birla, Ceat, JK Tyres and MRF command over 80% of the market, with product offerings across all major categories. India continues to be driven by the commercial vehicle tyre segment, where truck and bus tyres contribute as much as 55% of the industry s revenue. The replacement market accounts for 70% of the revenues, though the OE segment continues to play a crucial role in terms of volumes and ensuring product acceptability in the consumers mind. Amongst those who set up new manufacturing units in the country were Bridgestone, JK Tyres and MRF. Bridgestone s Rs 4.3 billion plant in central India was completed in July 2011. The unit is geared to produce 12,000 truck-bus radials and 120,000 passenger car radials every month. Both JK Tyres and MRF, like Apollo, chose the southern Indian state of Tamil Nadu as their preferred manufacturing location. JK Tyres facility, which was completed in February 2012 with an investment of Rs 10 billion, is equipped to manufacture around 208,000 passenger car radials and 33,000 truck-bus radials each month. MRF s facility, built with an investment of Rs 9 billion, has a capacity of 350,000 passenger car radials and 60,000 truck-bus radials per month. Ceat also ramped up capacity at its unit in Western India with a radial capacity of 150 tonnes per day. The Michelin facility in Tamil Nadu with a capacity of 2 million truck-bus radial tyres per year is currently under construction and expected to begin production later in the year. Apollo, Birla, BKT, Falcon, JK Tyres and MRF also sought to expand capacities in their existing facilities with combined investment to the tune of Rs 35 billion. Exports out of India grew in most categories and registered the highest growth of 65% in the off-the road tyre segment.
Outlook and Conclusion At the current market price of Rs.169.95, the stock P/E ratio is at 15.32 x FY15E and 13.59 x FY16E respectively. Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.11.09 and Rs.12.50 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 6% and 27% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at 7.26 x for FY15E and 6.61 x for FY16E. Price to Book Value of the stock is expected to be at 2.70 x and 2.35 x respectively for FY15E and FY16E. We recommend BUY in this particular scrip with a target price of Rs.204.00 for Medium to Long term investment. Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it s affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.
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