Apollo Tyres stock soars 6% as net profit rises over 164% in Q2

Apollo Tyres stock witnessed 5.7% surge in early trading on Wednesday, following the company's announcement of the September quarter earnings that outperformed market expectations. On Tuesday, the company posted a 164.80% surge in its consolidated net profit to ₹474 crore. In the same period of last year, the company had reported a net profit of ₹179 crore, and in the preceding June quarter, it recorded a net profit of ₹397 crore.

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The revenue from operations surged to ₹6,280 crore in Q2 FY24, compared to ₹5,956 crore in the same quarter last fiscal. It reported an operating profit of ₹1,160 crore in Q2, an increase of 63% when compared to ₹712 crore in the year-ago quarter.

The EBITDA margin reached 18% in Q2, demonstrating a significant year-over-year growth of 600 basis points (bps) and a rise of 100 basis points quarter-over-quarter.

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Following the company's impressive numbers, Apollo Tyres saw a robust start to Wednesday's trading session, with its stock opening at ₹391 per share, a significant increase from the previous day's close at ₹384.10. It continued to perform well, reaching an intraday high of ₹406 per share, reflecting a remarkable 5.70% increase.

"Over the last few years, there has been a noticeable change at Apollo Tyres. From a focus on gaining market share, it is now clearly seen working towards its Vision 2026, which, amongst other things, targets to achieve a RoCE of 12–15% on a sustainable basis," said domestic brokerage firm HDFC Securities in its October report.

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The brokerage has highlighted key initiatives undertaken by the company, including a rising focus on premiumisation both in India and Europe, a conscious decision to exit certain SKUs that are not remunerative, a focus on increased use of digital tools to improve operational efficiencies, and an ever-rising focus on sweating existing assets and hence targeting a much lower annual capex.

HDFC Securities said the pricing discipline in the domestic tyre industry has been commendable over the last few years, resulting in far lesser volatility in earnings for industry players than in the past.

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"While reduced Chinese competition would have partially helped, industry participants seem to have realised the need to focus on profitable growth for long-term survival. Such favourable industry dynamics would help improve the earnings visibility of tyre companies in the long run," the brokerage stated.

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As a result, the brokerage expresses confidence that Apollo is making progress towards achieving its Vision 2026, with its Return on Capital Employed (RoCE) already increasing from 4.9% in FY20 to 10% in FY23.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.