Apollo Tyres Gains Buy Rating

The Hindu Business Line newspaper has given Apollo Tyres its ‘buy’ rating. Though the performance of the Indian tyre companies have not been overly impressive in recent quarters, the situation is likely to improve, the report added, suggesting that Budget proposals along with the price hikes effected in the past would have a positive impact on tyre companies’ earnings.

Apollo Tyres has a major presence in the truck and bus tyre market and derives over 70 per cent of the revenues from the replacement market. Apart from the truck and bus tyres, the company maintains a presence in the tractor and passenger car radial segment as well. For the year-ended March 2004, the company’s turnover rose 19 per cent to 19.1 billion rupees (£232 million) while post-tax earnings dropped 41 per cent to 704 million rupees. The sharp increase in the price of key raw materials was the primary reason behind the drop in profitability. However, the situation is reported to have improved in recent months. The price of natural rubber has eased from the high recorded a few months ago. Apollo and other tyre producers have also increased tyre price to offset the impact of raw material price rise.

The impact of these measures and signs of improved business scenario are evident in the performance for the quarter ended December 2004. Turnover for this period increased 19 per cent to 6.82 billion rupees (£83.1 million), while post-tax earnings recorded 8 per cent growth to 169 million rupees (£32.06 million).