Buy Apollo Tyres, target Rs 340

We expect earnings to come at Rs. 1390 Cr, leading to an EPS of Rs 24.3 in FY20 and maintain a buy.

The continuing strong demand due to the anti-dumping duty and sales of higher-ton CVs is benefiting Apollo Tyres, in our view. Hence, we expect double-digit replacement growth in FY19, too.

Strong growth in truck radial tyres. The company plans to increase its Radial capacity in Chennai from 10,000 tyres a day to 12,000 by September 2018. The Hungary plant’s capacity is expected to be

increased by FY19 to 16,000 tyres a day and would be the volume growth catalyst in FY19 and FY20. Operating margin of its European business to improve from 2.6% in FY18 to 4% in FY19.

The company has started foundation work for a new passenger-car-tyre plant in Andhra Pradesh and expects volumes to scale up in FY20. We expect revenue to clock a 19% CAGR over FY18-20 to Rs. 21,100 Cr and expect the margin to expand from the present 11.1% in FY18 to 12.5% in FY20. Accordingly, we expect earnings to come at Rs. 1390 Cr, leading to an EPS of Rs 24.3 in FY20. We maintain a buy.

MORE WILL UPDATE SOON!!

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