Shares of Apollo Tyres Ltd. rose to an all-time high after the tyre maker outperformed peers in earnings for the three months ended June, a quarter disrupted by fears over the rollout of the Goods and Services Tax.
Deutsche Bank retained its positive outlook on the tyre maker due to its relatively strong performance in an otherwise “difficult quarter”. The first quarter of financial year 2017-18 was expected to be “annus horribilis” for the Indian tyre industry due to a decline in volume led by Goods and Services Tax implementation, and a delayed impact of higher raw material costs, the brokerage said.
Apollo Tyres' margins fell less than its peers', both year-on-year and over the previous quarter. Earnings before interest, tax, depreciation and amortisation margin of 8.3 percent was higher than MRF Ltd.'s at 7.7 percent and CEAT Ltd.'s 2.3 percent.
Deutsche Bank expects an overall improvement in the industry, with Apollo Tyres' margins likely to expand on a:
- Volume growth.
- Decline in commodity prices.
- Partial return of pricing power in truck tyre segment.
Apollo Tyres rose as much as 8.8 percent to Rs 285.30 on Monday. Deutsche Bank retained its ‘Buy' rating on the stock.
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