Shares of Apollo Tyres surged by over 7% in early trading on Thursday despite the tyre company posting a 14% fall in net profit for Q4 FY24. The stock rallied by 7.21% to reach an intraday high of Rs 508.3 per share on the NSE.
On Tuesday, Apollo Tyres reported a 14% decline in its consolidated net profit for the March 2024 quarter, amounting to Rs 354 crore, due to higher expenses. In comparison, the company had recorded a net profit of Rs 410 crore in the January-March quarter of the previous fiscal year.
In a statement, Apollo Tyres reported that revenue from operations for the March 2024 quarter stood at Rs 6,258 crore, compared to Rs 6,247 crore in the fourth quarter of the 2022-23 fiscal year.
Brokerages on Apollo Tyres
JP Morgan on Apollo Tyres
JP Morgan has upgraded Apollo Tyres from ‘Neutral’ to ‘Overweight’ and raised the target price from Rs 535 to Rs 555. According to the report, Apollo Tyres is prioritizing pricing and capital expenditure (capex) discipline over aggressively pursuing market share.
JP Morgan believes that this protective approach to maintaining price discipline, coupled with a strong focus on reducing debt, could lead to a re-rating of Apollo Tyres’ stock.
The report also notes that while margins in the first half of the year may be somewhat subdued, the company is expected to implement price hikes and reduce interest costs. These measures are anticipated to support Apollo Tyres’ earnings for the full year, contributing to a more favorable financial outlook.
JP Morgan’s positive outlook on Apollo Tyres is based on the company’s strategic priorities and financial discipline, which are seen as key factors in its potential stock re-rating.
Morgan Stanley on Apollo Tyres
Morgan Stanley maintained its ‘Equal-weight’ rating on Apollo Tyres but lowered the target price to Rs 472 from Rs 475. The report cited Q4 EPR provision costs and weak EU distribution margins as the reasons for the missed expectations.
Despite these challenges, the domestic tyre industry is showing signs of demand recovery, and Apollo Tyres is executing well on its strategy. However, peak margins keep Morgan Stanley on the sidelines regarding a more bullish stance on the stock.
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