Apollo a Recommended Buy – Broker

The online stock broking firm India Infoline has indicated that Apollo Tyres is a prudent share purchase, and has placed a recommended buy rating on the stock with a target of Rs 397 (£4.74). India Infoline describes Apollo as the leading commercial vehicle tyre player in India and adds that the company is expanding at a rapid pace, both organically and inorganically. The brokerage firm expects Apollo’s topline and bottom line to grow by 14.3 per cent and 26.2 per cent respectively between the 2006 and 2009 financial years.

Apollo is expanding passenger car tyre capacity by 1,100,000 units and light commercial tyre capacity by 100,000 units by the end of the 2007 financial year, increasing total production to 410 tonnes per day. To add to the tyremaker’s sharemarket desirability, Apollo have also recently commenced production of its Dura Tyre range of retreads, scheduled for initial launch in northern India in May 2007.

India Infoline points out that the commercial vehicle tyre segment is the industry’s largest in terms of revenue, and in this market Apollo enjoyed a 28 per cent market share for truck and bus tyres and 26 per cent for light commercials during FY 2007. The company has recently launched a line of truck and bus radials, a segment tipped to grow more than 20 per cent in coming years.

In conclusion, India Infoline stated: “We expect ATL to grow organically as well as inorganically in coming years. Strong cash flow generation in the next two years will take care of expansion plans and ATL would be still left with more cash. We expect ATL to use this to grow inorganically the way it did with Dunlop Tyres International acquisition, which has a presence in South Africa and Zimbabwe.”