Earnings Outlook
High input costs to weigh down Apollo Tyres in Oct-Dec
This story was originally published at 22:15 IST on 4 February 2025
Register to read our real-time news.Informist, Tuesday, Feb. 4, 2025
By Steffy Maria Paul
MUMBAI – The surge in natural rubber prices is expected to weigh down the December quarter earnings of Apollo Tyres Ltd. despite price hikes by the company. A decline in volumes on account of weak demand in certain segments is also expected to add to the woes of the tyre maker in the latest quarter.
For the December quarter, the consolidated net profit of Apollo Tyres is seen falling 21% on year to INR 3.91 billion, according to the average of the estimates from 10 brokerages. The estimates for net profit range from INR 3.25 billion by JM Financial Institutional Securities Pvt. Ltd. to INR 4.45 billion by Anand Rathi Share and Stock Brokers Ltd.
The company's consolidated net sales are expected to rise 3% to INR 67.82 billion for the latest quarter, the estimates showed. The lowest estimate for the top line was INR 66.61 billion by Kotak Institutional Equities, while the highest was INR 69.78 billion by Nuvama Wealth Management Ltd. Sequentially, its net profit is seen up 31%, while net sales may rise 5%.
Tyre companies are expected to witness margin compression in the quarter on account of the surge in prices of natural rubber, Elara Capital said. The impact of the price rise in the September quarter is expected to spill over to the December quarter as well.
The growth in the company's standalone revenue will be driven by a 5% increase in the average selling price due to the price hikes taken by the company, Kotak said. However, this will be partly offset by a 1% on-year decline in volumes. The brokerage attributed the decline in volumes to the weakness in the commercial vehicle original equipment manufacturer segment and the moderate demand in the passenger car radial segment.
While the company has taken a 2% price hike in the truck, bus, and radial tyre segment and a 3% price hike in the passenger car radial tyre segment, it would be insufficient to cover the continuous rise in input costs, Motilal Oswal said.
Brokerage Motilal Oswal expects the revenue growth to be aided by a strong performance in its India and Europe business. The revenue growth will also be aided by the steady demand in the replacement segment in the domestic market despite the muted demand in the domestic original equipment manufacturer segment, the brokerage said.
The company is expected to report earnings before interest, tax, depreciation, and amortisation of INR 9.88 billion for the December quarter, according to the average of estimates from eight brokerages. The EBITDA is expected to be in the range of INR 9.05 billion to INR 11.03 billion.
Kotak expects Apollo Tyres' standalone EBITDA margin to improve in the latest quarter due to better operating leverage, price hikes, and cost-cutting measures. However, the brokerage expects this to be partly offset by unfavourable raw material prices.
Motilal Oswal expects the EBITDA margin of the company's India business to contract sequentially on account of higher input costs and other operating expenses and that of its Europe business to decline on year on a high base. Brokerage Mirae Asset Sharekhan expects Apollo's EBITDA margin to see revival from the next quarter. The management's commentary on input costs and demand in the replacement segment will be key monitorables, Motilal Oswal said.
Apollo Tyres will detail its earnings for the December quarter on Thursday. On Tuesday, shares of the company closed at INR 421.95 on the National Stock Exchange, up 1.8% from the previous close.
The stock has fallen 11.2% since it detailed its September quarter earnings. During the previous quarter, the company had reported a consolidated net profit of INR 2.97 billion on revenues of INR 64.37 billion. Of the 12 brokerage reports on the company available with Informist, eight have a 'buy' or equivalent rating on the stock, one has a 'hold' or equivalent rating, and three have a 'sell' rating on the stock.
Following are the Oct-Dec earnings estimates for Apollo Tyres based on reports from 10 brokerage firms in descending order by the estimate of net profit (in INR million):
Brokerage Firm | Net Sales | Net Profit | EBITDA |
Anand Rathi Share and Stock Brokers Ltd | 68,802.00 | 4,466.00 | -- |
Nuvama Wealth Management Ltd | 69,782.00 | 4,382.00 | 10,582.00 |
Incred Research Services Pvt Ltd | 68,105.00 | 4,320.00 | 11,033.00 |
Motilal Oswal Financial Services Ltd | 67,712.00 | 4,055.00 | 9,900.00 |
Sharekhan Ltd | 67,270.00 | 3,950.00 | -- |
Elara Securities (India) Pvt Ltd | 67,863.00 | 3,861.00 | 9,747.00 |
Nirmal Bang Equities Pvt Ltd | 67,932.00 | 3,841.00 | 9,850.00 |
Kotak Institutional Equities | 66,605.00 | 3,555.00 | 9,579.00 |
Emkay Global Financial Services Ltd | 67,273.00 | 3,405.00 | 9,048.00 |
JM Financial Institutional Securities Pvt Ltd | 66,893.00 | 3,250.00 | 9,317.00 |
Average | 67,823.70 | 3,908.50 | 9,882.00 |
End
Edited by Avishek Dutta
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. 2025. All rights reserved.
To read more please subscribe
Share this Story:
