Company Update : Apollo Tyres Ltd By Motilal Oswal Financial Services Ltd
Weak quarter impacted by standalone business drag
* Consol revenue grew 5% YoY to INR69.3b (est. INR67.7b) in 3QFY25.
* However, due to higher RM costs, gross margin contracted 510bp YoY/330bp QoQ to 41.5% (est. 44.9%).
* High RM costs were partially offset by lower operating expenses. As a result, EBITDA declined ~22% YoY to INR9.5b (in line).
* EBITDA margin contracted 460bp YoY (+10bp QoQ) to 13.7% (est. 14.6%).
* The company and a subsidiary incurred expenses of INR42.37m in 3QFY25 for an employee reorganization scheme, reported as an exceptional item.
* This, coupled with lower other income, led to a PAT miss at INR3.4b (-33% YoY, est. INR4.1b).
* Standalone business remains weak: Revenue for India business grew 5% YoY, whereas EBITDA/PAT declined ~36%/59% YoY. EBITDA margin declined to 11.1% (vs. 18.1% in 3QFY24 and 12.1% in 2QFY25, est. 11.5%).
* European operations better off: Derived revenue/EBITDA grew ~6%/5% YoY in 3Q. EBITDA margin improved to 18.6% (vs. 17% in 3QFY24 and 17.2% in 2QFY25).
* Valuation: The stock trades at 13.7x FY26E/11.2x FY27E consolidated EPS
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