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Dolat Capital Report
Apollo Tyres Ltd.'s Q1 FY21 numbers beat our estimates. Operating margin was 8.3% (down 270 basis points QoQ), beating our estimates due to favorable raw material prices, improvement in product mix (high proportion of replacement volume) and cost control measures.
However, profit after tax was suppressed by high interest costs. Revenue de-grew by 34% YoY to Rs 28.2 billion, led by 42% fall in Asia Pacific, Middle East and Africa sales, 12% in Europe and 60% YoY in other regions.
Management stated that the recovery in the replacement market looks promising, recording a growth of 10% YoY in the month of July led by strong uptick in farm segment and truck-bus radial tyres.
Passenger car radial and two-Wheelers tyre demand are also picking up gradually. Current inventory stands at seven days due to production constraints.
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