9 months ago
Apollo Tyres Boosts Profitability, Faces Competitive Pressure
Apollo Tyres had a better-than-expected quarter, with profits going up because it cost less to make their tires.
They sold more tires in India and abroad.
However, another company is now making similar tires, which might make it harder for Apollo Tyres to keep their profits high in the future.
Apollo Tyres' Ebitda margin expanded 90 bps sequentially in Q2FY26, driven by a 170 bps increase in gross margin to 14.9%
Raw material cost declined 3% sequentially, with further benefits expected in Q3FY26
Indian volumes grew 4%, with OEM and replacement segments up 4% and 2% respectively
Export volumes rose by double-digits, with strong recovery expected in H2FY26
Intense competition from Balkrishna Industries Ltd may pressure margins in FY27/FY28
- Who
- Apollo Tyres Ltd
- What
- Reported higher-than-anticipated profitability in Q2FY26, driven by lower raw material costs and increased volumes
- Where
- India and international markets
- When
- Q2FY26 (July-September 2023)
- Why
- Improved profitability due to lower raw material costs, increased volumes, and operational efficiency; potential margin pressure due to increased competition
Optimistic View
Cautious View
Profitability Outlook
Optimistic View
Benign raw material costs and operational improvements should boost profitability
Cautious View
Increased competition may lead to higher discounting and marketing spends, putting pressure on margins
Key facts
- Company
- Apollo Tyres Ltd
- Business
- Manufactures tires for various vehicle types
- Q2FY26 Ebitda Margin
- 14.9% (up 170 bps sequentially)
- Indian Volume Growth (Q2FY26)
- 4%
- Export Volume Growth (Q2FY26)
- Double-digits
- Key Competitor
- Balkrishna Industries Ltd
Quotes
Apollo Tyres Ltd management
The management of Apollo Tyres Ltd
“Benign raw material cost, an improving mix towards replacement and exports and closure of Enschede plant in Netherlands by June 2026 should unlock structural cost benefits.”
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Nomura Global Markets Research
Research analysts from Nomura Global Markets Research
“We maintain around 6% India volume growth over FY27-28F, driving around 6% revenue CAGR over FY25-28F.”
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HDFC Securities
Analysts from HDFC Securities
“We have accordingly cut our volume and profitability estimates for standalone operations for FY28, leading to an 11.5% EPS cut.”
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