Wednesday, May 11, 2011

Result Flash - Apollo Tyres - 4QFY2011

Dear All,

 

Forwarding you the Result Flash on Apollo Tyres for 4QFY2011 with a Buy recommendation.

 

 

 

Apollo Tyres - 4QFY2011 standalone results

 

 

Y/E March (Rs cr)

4QFY11

4QFY10

% chg (yoy)

Angel est.

% diff

 Net Sales

       1,762

      1,313

34.2

         1,490

18.2

 Operating Profit

          146

         185

(20.7)

            142

3.0

 OPM (%)

           8.3

        14.1

(575)bp

             9.5

(123)bp

 Reported PAT

            66

         116

(43.0)

              49

35.2

Source: Company, Angel Research

 

Review

 

v  For 4QFY2011, Apollo Tyres registered a robust and better-than-expected 34.2% yoy increase in net sales to Rs1,762cr driven by 14% increase in volumes and due to the improvement in product mix and price increases.

v  On the operating front, the company reported 21% yoy dip in EBITDA, where operating margins for the quarter fell marginally by a substantial 575bp yoy on higher natural rubber cost which increased by 60% in 4QFY2011. Moreover, decline in staff cost during the quarter arrested further contraction in margins to certain extent.

v  As a result, net profit for the quarter declined by 43% yoy. Further, higher interest cost and depreciation also negatively impacted bottom-line performance. However, lower tax outgo on account of MAT credits marginally benefitted the bottom-line performance.

 

Consolidated performance: The company reported a strong 27% yoy and 15.2% qoq increase in the consolidated top-line to Rs2,730cr aided by 12% yoy increase in volumes and ~16% yoy jump in realization. Revenues at South Africa and European operations grew by 31% and 10% yoy, respectively. OPM on a consolidated basis declined 215bp yoy mainly due to icrease in raw-material cost pressures However, on a sequential basis, the operating margins improved marginally by 24bp. The company benefitted at the operating level to the tune of Rs60cr during 4QFY2011 largely on the employee expenses front and also due to inventory revaluation. Adjusted net profit on a consolidated basis increased 9.6% yoy to Rs193cr.  

 

Outlook

 

In view of the apparent structural shift that the tyre industry is going through, we remain positive on the sector. The stock is available at attractive valuations of 9.5x and 7x FY2012E and FY2013E earnings. We retain our Buy rating on the stock, however, target price is under review. We shall release a detailed update note soon.

 

Quarterly performance (consolidated)

 

 

Y/E March (Rs cr)

4QFY11

4QFY10

% chg

FY2011

FY2010

% chg

Net Sales

2,730

2,143

27.4

8,868

8,121

9.2

Consumption of RM

1,592

1,202

32.4

4,821

4,152

16.1

(% of Sales)

58.3

56.1

 

54.4

51.1

 

Staff Costs

250

297

(15.8)

1,155

1,088

6.1

(% of Sales)

9.2

13.9

 

13.0

13.4

 

Purchases of TG

149

108

37.3

481

429

12.2

(% of Sales)

5.5

5.1

 

5.4

5.3

 

Other Expenses

417

237

76.0

1,432

1,277

12.2

(% of Sales)

15.3

11.1

 

16.2

15.7

 

Total Expenditure

2,408

1,845

30.5

7,890

6,946

13.6

Operating Profit

321

298

7.7




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