(Reuters) – India’s Apollo Tyres reported a smaller-than-expected third-quarter profit on Thursday, as high rubber costs cut into the impact of healthy tyre demand.
Consolidated net profit fell 32% to 3.37 billion rupees ($38.49 million) for the quarter ended December 31, missing analysts’ average estimate of 3.84 billion rupees, as per data compiled by LSEG.
Revenue from operations rose 5% to 69.28 billion rupees, beating analysts’ average estimate of 68.43 billion rupees, while total expenses grew 10%.
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KEY CONTEXT
Apollo Tyres, which manufactures tyres for automakers such as Maruti Suzuki, Mahindra & Mahindra and TVS Motor Company, depends on auto sales for a big chunk of their revenue.
Rubber, a key raw material for tyre makers, saw an increase in prices in the December quarter. Cost of materials consumed for the company rose 11.7%.
Analysts said that Apollo raised prices by about 2%-3% for some segments during the quarter. They also said that demand for replacing worn out tyres sustained, but that from original equipment manufacturers was muted.
Peers MRF and CEAT also reported falls in quarterly profit due to a hike in raw material prices.
PEER COMPARISON
Valuation Estimates (next 12 Analysts’ sentiment
(next 12 months)
months)
RIC PE EV/EBI Revenue Profit Mean # of Stock to Div
TDA growth (%) growth (%) rating* analyst price yield
s target** (%)
Apollo Tyres 13.97 6.87 7.49 26.97 Buy 22 0.80 1.42
CEAT 17.68 7.71 13.61 30.07 Buy 15 0.92 0.98
JK Tyre & 9.04 6.04 7.50 17.56 Buy 4 0.63 1.44
Industries
MRF 21.83 10.36 10.78 12.94 Sell 4 0.95 0.17
* The mean of analysts’ ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell
** The ratio of the stock’s last close to analysts’ mean price target; a ratio above 1 means the stock is trading above the PT
OCTOBER-DECEMBER STOCK PERFORMANCE
— All data from LSEG
— $1 = 87.5480 Indian rupees
(Reporting by Meenakshi Maidas in Bengaluru; Editing by Mrigank Dhaniwala)
