Earnings Outlook
Spike in rubber price to drag Apollo Tyres PAT, margin down
This story was originally published at 16:44 IST on 11 November 2024
Register to read our real-time news.Informist, Monday, Nov. 11, 2024
By Simran Rede
MUMBAI – A surge in prices of raw materials is likely to affect Apollo Tyres Ltd.'s Jul-Sept net profit and margins, according to analysts. Prices of natural rubber, the key raw material for tyre-making companies, increased 20% sequentially during the September quarter, according to Nirmal Bang Equities.
The tyre manufacturer is likely to report a consolidated net profit of INR 3.24 billion for the quarter, down 31.6% on year, but up 7.4% sequentially, according to an average of estimates from eight brokerage firms. The estimates for net profit range from a low of INR 2.56 billion by Elara Securities to a high of INR 3.75 billion by Motilal Oswal Financial Services.
The company's September quarter revenue is seen at INR 64.90 billion, up 3.4% on year and 2.5% sequentially, according to an average of estimates from eight brokerages. Estimates for revenue range from a low of INR 63.74 billion from Elara Securities to a high of INR 66.84 billion from Anand Rathi Securities.
Some analysts expect softer revenue growth of 2-3% owing to weak demand from original equipment manufacturers. On the other hand, Anand Rathi Securities expects the company to post a 6.4% growth in revenue. According to Nuvama Institutional Equities, the company's revenue is expected to grow 4% on the back of higher sales in the Asia-Pacific, West Asia, Africa and Europe regions. The company's European business is likely to grow 3% on year and its business in the Asia-Pacific, West Asia, and Africa is likely to grow 2% on year, broking firm Sharekhan said.
The company is expected to report consolidated earnings before interest, tax, depreciation, and amortisation of INR 8.99 billion for the September quarter, according to the average of estimates from six brokerages. The estimates for EBITDA are in the range of INR 8.16 billion to INR 9.37 billion.
Most analysts expect the EBITDA margin to contract due to a rise in natural rubber prices and a lower-than-expected price hike. Motilal Oswal expects the consolidated EBITDA margin to be 14.1%, down 30 basis points sequentially, despite a price hike taken at the end of the September quarter. The effect of the price hikes will largely be visible from the December quarter, the brokerage said.
The Haryana-based company has four plants in India and one each in The Netherlands and Hungary. The trucks and buses segment accounted for 43% of the company's total consolidated revenue in the June quarter whereas 36% of the revenue came from the passenger vehicles segment. The farm and off-highway segment accounted for 10% of the revenue, the light commercial vehicles segment accounted for 6%, and other vehicles accounted for another 6%, the company had said in its investor presentation after the June quarter earnings.
The company will announce its September quarter earnings on Wednesday. On Monday, shares of Apollo Tyres closed at INR 483.25 on the National Stock Exchange, down 1.6% from the previous trading session.
Following are the Jul-Sept earnings estimates of Apollo Tyres based on reports compiled by Informist from eight brokerages:
| Brokerage Firm | Net sales | Net profit | EBITDA |
|---|---|---|---|
| ----(In INR million)----- | |||
| Anand Rathi Share and Stock Brokers Ltd. | 66,836.00 | 3,038.00 | ---- |
| Elara Securities (India) Pvt. Ltd. | 63,740.00 | 2,560.00 | 8,157.00 |
| Kotak Institutional Equities | 64,779.00 | 3,239.00 | 9,062.00 |
| Motilal Oswal Financial Services Ltd. | 64,188.00 | 3,749.00 | 9,371.00 |
| Nirmal Bang Equities Pvt. Ltd. | 65,307.00 | 3,422.00 | 9,274.00 |
| Nomura Equity Research | 64,773.00 | 3,348.00 | 9,029.00 |
| Nuvama Wealth Management Ltd. | 65,117.00 | 3,209.00 | 9,040.00 |
| Sharekhan Ltd. | 64,470.00 | 3,370.00 | ---- |
| Average | 64,901.25 | 3,241.88 | 8,988.83 |
End
Edited by Ashish Shirke
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2024. All rights reserved.
To read more please subscribe
Share this Story:
