Apollo Tyres

Please refer to important disclosures at the end of this report 1

Y/E March (Rs cr) 1QFY11 1QFY10 % chg (yoy) Angel Est. % Diff.

Net Sales 1,121 1,180 (5.0) 1,204 (6.9)

Operating Profit 117 194 (39.8) 130 (10.1)

OPM (%) 10.4 16.4 (603)bp 10.8 (37)bp

Reported PAT 41 95 (57.1) 55 (26) Source: Company, Angel Research

Apollo Tyres reported modest results for 1QFY2011, despite a sharp jump in rubber prices and lockout at one of its plant. Standalone top-line registered a decline of 5% yoy to Rs1,121cr (Rs1,180cr) in 1QFY2011. Tonnage sold for the quarter declined 20% qoq to 66,000MT on account of the lockout at its Permabra facility due to labor unrest. The Perambara plant shut down resulted in revenue loss of around ~Rs300cr (15,000MT of production loss) during the quarter. On the operating front, the company reported 603bp yoy contraction in operating margin at 10.4% (16.4%). During 1QFY2010, net profit registered a substantial decline of 57.1% to Rs40.6cr (Rs95cr).

Decent consolidated performance: The company however, reported healthy performance at the consolidated level with both the subsidiaries reporting good growth and also supported the company’ overall OPM. On a consolidated basis, the company recorded 11.4% yoy jump in top-line and marginal 1% increase in net profit at Rs74cr. Consolidated tonnage volume for the quarter was 93,000MT. Operating margins at the consolidated level stood at 10.9% (12.6%) in 1QFY2011.

Outlook and Valuation: The tyre industry, during FY2010, benefited largely from the substantial decline in raw material prices and spike in replacement demand. Going ahead, we are positive on the sector as the OEM off-take is expected to improve on better overall auto industry volume growth. The recent run up in raw material prices is however, a concern and expected to exert pressure on OPMs. We expect the company to clock EPS of Rs7.9 in FY2011E and Rs9.8 in FY2012E. We believe that strong demand, prevailing high capacity utilisation levels and higher investment requirements, would help the Indian tyre Industry to arrest the sharp decline in margins despite the upward move in input costs (rubber and carbon black). Thus, we maintain a Buy on Apollo Tyres, with a Target Price of Rs79, at which level the stock would trade at 8x, 5x and 1.4x FY2012E EPS, EV/EBITDA and P/BV, respectively.

Key Financials (Consolidated)

Y/E March (Rs cr) FY2009 FY2010 FY2011E FY2012E

Net Sales 4,995 8,117 9,260 10,398

% chg 6.4 62.5 14.1 12.3

Net Profit 139.2 653.4 399.2 495.9

% chg (48.4) 369.5 (38.9) 24.2

OPM (%) 8.5 14.6 10.1 10.6

EPS (Rs) 2.8 13.0 7.9 9.8

P/E (x) 23.2 4.9 8.1 6.5

P/BV (x) 2.4 1.6 1.3 1.1

RoE (%) 16.2 24.0 24.1 16.9

RoCE (%) 13.2 29.2 13.9 14.9

EV/Sales (x) 0.8 0.6 0.5 0.5

EV/EBITDA (x) 8.9 3.9 5.3 4.4

Source: Company, Angel Research

BUY CMP Rs64 Target Price Rs79

Investment Period 12 Months Stock Info

Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters 39.8

MF / Banks / Indian Fls 18.3

FII / NRIs / OCBs 29.3

Indian Public / Others 12.6

Abs. (%) 3m 1yr 3yr

Sensex 1.8 16.1 17.1

Apollo Tyres (8.1) 60.0 66.1

5,368

APLO.BO

3,221

0.9

83/38

1,254,170

Market Cap (Rs cr)

Beta

52 Week High / Low

1

17,868

APTY@IN

Face Value (Rs)

BSE Sensex

Nifty

Reuters Code

Tyre

Avg. Daily Volume

Vaishali Jajoo 022-4040 3800 Ext: 344

[email protected]

Yaresh Kothari 022-4040 3800 Ext: 313 [email protected]

Apollo Tyres Performance Highlights

1QFY2011Result Update | Tyre

July 30, 2010

Apollo Tyres |1QFY2011 Result Update

2July 30, 2010

Exhibit 1: Quarterly Performance (Standalone) Y/E March (Rs cr) 1QFY11 1QFY10 % chg FY10 FY09 %chg

Net Sales 1,121 1,180 (5.0) 5,037 4,072 23.7

Consumption of RM 737 663 11.2 3,022 2,821 7.1

(% of Sales) 65.8 56.2

60.0 69.3

Staff Costs 77.4 62.6 23.6 289.5 207.6 39.5

(% of Sales) 6.9 5.3

5.7 5.1

Purchases of TG 27 30 (10.9) 152 116 30.6

(% of Sales) 2.4 2.5

3.0 2.9

Other Expenses 163 230 (29.2) 789 601 31.4

(% of Sales) 14.5 19.5

15.7 14.8

Total Expenditure 1,004 986 1.9 4,253 3,746 13.5

Operating Profit 117 194 (39.8) 784 326 140.6

OPM (%) 10.4 16.4

15.6 8.0

Interest 25.9 20.3 27.8 74.0 66.8 10.6

Depreciation 34.1 31.2 9.6 122.8 98.0 25.3

Other Income 1 1 (7.7) 11 10 7.9

PBT (excl. Extr. Items) 57 143 (59.9) 598 171 249.5

Exceptional Items - - - - - -

PBT (incl. Extr. Items) 57.5 143.4 (59.9) 598.2 171.2 249.5

(% of Sales) 5.1 12.2

11.9 4.2

Provision for Taxation 16.9 48.8 (65.3) 183.2 63.1 190.6

(% of PBT) 29.4 34.0

30.6 36.8

Reported PAT 40.6 94.7 (57.1) 415.0 108.1 283.8

PATM (%) 3.6 8.0

8.2 2.7

Equity capital (cr) 50.4 50.4

50.4 50.4

EPS (Rs) 0.8 1.9 (57.1) 8.2 2.1 283.8


Top-line declines 5% yoy, lockout at Perambra impacts volume: Standalone top-line registered a decline of 5% yoy to Rs1,121cr (Rs1,180cr) in 1QFY2011, came in below our estimates. Tonnage sold for the quarter declined 20% qoq to 66,000MT on account of the Perambra plant lockout due to labour unrest. The plant shut down resulted in revenue loss of around ~Rs300cr (15,000MT of production loss) during the quarter. However, price hikes taken during the quarter - 5% in April 2010 in the OE segment and 7% in replacement segment - arrested further decline in top-line.


3July 30, 2010

Exhibit 2: Top-line declines on lock-out at Perambra facility


OPM at 10.4%, contraction of 603bp on increase in rubber price: On the operating front, the company reported 603bp yoy contraction in operating margin at 10.4% (16.4%) during 1QFY2011, on a standalone basis. In absolute terms, operating profit fell by 40% yoy to Rs117cr (Rs194cr). Apollo’s subdued performance on the operating front was largely on account of the substantial increase in raw material costs to the extent of 939bp yoy following sharp rise in cost its key raw material - rubber. Despite the increase in product prices, the company is not yet fully covered. Average rubber price for the company for 1QFY2011 stood at Rs165/kg (Rs140/kg in 4QFY2010 and Rs100 in 1QFY2010). However, fall in other expenditure by a substantial 496bp yoy restricted further fall in operating profit.

Exhibit 3: Average raw material cost/kg trend Particulars 1QFY11 4QFY10 % qoq chg

Nylon Tyre Cord Fabric 205 195 5.1

Natural Rubber 165 140 17.9

Carbon Black 52 50 4.0


Exhibit 4: Increase in natural rubber prices...

Source: Company, Angel Research, Crisil Research

Exhibit 5: ... led to contraction in EBITDA margins


9.7

24.3

46.5

18.2

(5.0)

(25)

0

25

50

900

1,050

1,200

1,350

1QFY10 2QFY10 3QFY10 4QFY10 1QFY11

(%)(Rs cr) Net Sales (LHS) Net Sales Growth (RHS)

120 135

78 72 98 102

118 141

165

0

50

100

150

200

1QF

Y09

2QF

Y09

3QF

Y09

4QF

Y09

1QF

Y10

2QF

Y10

3QF

Y10

4QF

Y10

1QF

Y11

(Rs/kg) Average quarterly rubber prices

16.4 16.4 15.5 14.1 10.4

58.8 60.1 64.7 67.8 68.2

0

25

50

75


(%) EBITDA Margin Raw Material Cost/Sales


4July 30, 2010

Net profit at Rs40.6cr, down 57.1%: During 1QFY2011, net profit registered a substantial decline of 57.1% to Rs40.6cr (Rs95cr) primarily on account of lower dispatches due to plant closure and margin contraction. Higher interest cost and depreciation also impacted bottom-line to a certain extent, while capitalisation of the Chennai plant resulted in lower tax rate in 1QFY2011.

Exhibit 6: Net profit down 57% on lower dispatches and margin contraction


8.0 8.4 7.7

8.8

3.6

0

4

8

12

0

50

100

150


(%)(Rs cr) Net Profit (LHS) Net Profit Margin (RHS)


5July 30, 2010

Exhibit 7: Quarterly Performance (Consolidated) Y/E March (Rs cr) 1QFY11 1QFY10 % chg FY10 FY09 % chg

Net Sales 1,821 1,635 11.4 8,117 4,995 62.5

Consumption of RM 940 867 8.3 4,149 3,228 28.5

(% of Sales) 51.6 53.0

51.1 64.6

Staff Costs 291.1 192.9 50.9 1,088.3 414.9 162.3

(% of Sales) 16.0 11.8

13.4 8.3

Purchases of TG 83 50 65.5 429 183 134.1

(% of Sales) 4.5 3.1

5.3 3.7

Other Expenses 309 319 (3.3) 1,268 747 69.8

(% of Sales) 17.0 19.5

15.6 14.9

Total Expenditure 1,622 1,429 13.5 6,933 4,573 51.6

Operating Profit 199 206 (3.5) 1,184 422 180.4

OPM (%) 10.9 12.6

14.6 8.5

Interest 33.8 30.7 10.3 134.3 111.8 20.2

Depreciation 63.8 54.4 17.3 254.2 128.5 97.8

Other Income 3 1 134.8 119 31 278.1

PBT (excl. Extr. Items) 104 122 (14.6) 914 213 328.3

Exceptional Items - - - (3.4) (0.6) -

PBT (incl. Extr. Items) 104.3 122.1 (14.6) 917.4 214.0 328.7

(% of Sales) 5.7 7.5

11.3 4.3

Provision for Taxation 30.2 48.5 (37.8) 260.7 74.2 251.2

(% of PBT) 28.9 39.7

28.4 34.7

Reported PAT 74.2 73.7 0.7 656.7 139.7 369.9

PATM (%) 4.1 4.5

8.1 2.8

Equity capital (cr) 50.4 50.4

50.4 50.4

EPS (Rs) 1.5 1.5 0.7 13.0 2.8 369.9


Consolidated Performance: The company however, reported healthy

performance at the consolidated level with both the subsidiaries reporting

good growth and also supported the company’ overall OPM. On a

consolidated basis, the company recorded 11.4% yoy jump in top-line and

marginal 1% increase in net profit at Rs74cr. Consolidated tonnage volume

for the quarter was 93,000MT. Operating margins, at the consolidated level,

stood at 10.9% (12.6%) in 1QFY2011.

Strategic investment in subsidiaries augurs well; arrested margin contraction to

certain extent: During 1QFY2011, Apollo’s subsidiary, Dunlop, registered

top-line of around Rs276cr and OPM of 6%. Top-line growth came solely on

the back of volume growth reflecting the slow recovery in the South African

markets. At the same time, the newly acquired Dutch tyre-maker, Vredestein

Banden, clocked turnover of Rs440cr in 1QFY2011 and registered OPM of

16%. Management is sanguine about clocking good growth for both the

entities.


6July 30, 2010

Conference Call – Key Highlights

Rubber price and price hike action: Management expects natural rubber prices

to remain at current levels of ~ Rs185/kg in 2QFY2011, but expects it to

soften up by 2HFY2011. Rubber imports have increased as the international

rubber prices are ~ Rs30 lower than the domestic prices. The company

imports around 13 -15% of its rubber requirement, which could double in the

current quarter.

In the OEM category, the company hiked prices by 5% each in December

2009, February, April and July 2010. It was easy to pass on the raw material

increases to the OEM customers as they have a significant demand for tyres. In

the replacement segment, the company hiked prices by 5% in January 2010,

3.5% in May 2010, 3.5% in June 2010 and another 3% in July 2010.

Chennai green-field expansion on track: The Chennai green-field capacity is

progressing well and management expects to commission 100tpd in Phase 1

in FY2011, with 200tpd and 400tpd planned to be added in FY2012 and

FY2013, respectively. The expansion entails total investment of Rs2,000cr, out

of which around Rs1,000cr was invested by March 2010.

For FY2011, the company plans to incur overall capex of Rs1,300cr. The

Indian operations will see a major portion of the capex of Rs1,000cr being

incurred at the Chennai facility where it further intends to double existing

capacity for the passenger car tyres. Capex of around Rs120cr will be incurred

at the South African facility, while another Rs80cr will be spent at the European

subsidiary. For FY2012, Apollo plans to incur capex of Rs400cr at its Indian

facilities and maintenance capex across other locations. The company’s net

debt, on a consolidated basis, is Rs1,626cr, up from Rs1,360cr at end of

4QFY2010, which increased mainly to fund capex at the Chennai plant.

Overseas operations: The nation-wide port strike in South Africa resulted in

supply-side constraints, which in turn impacted volume off-take during the

quarter for Dunlop. Apollo has taken a 10% price hike in May in the South

African market. Vredestein continued to report robust volume off-take on

account of an extended winter driving tyre demand during the quarter. Apollo

hiked prices by 4% in May in the European market.


7July 30, 2010

Investment Arguments

Tyre industry set for structural shift: Currently, manufacturing radial tyres is far

more capital intensive than cross-plys. Investment per tonnes per day (tpd) is

3.2x of cross-ply at Rs6.1cr/tpd. On the other hand, the selling price of radial

tyres is around 20% higher than the cross-ply tyres. Taking into account the

difference in capital requirements and consequent impact on asset turnover,

interest cost and depreciation, to generate similar RoCE and RoE, the tyre

companies would need to earn EBITDA margins of around 21% compared to

around 9% being earned on cross-ply tyres. Thus, higher capital requirements

will help protect margins from upward bound input costs, as the business

model evolves bearing in mind final RoEs rather than margins. With the sector

set for a structural shift and apparent pricing flexibility, it will result in an

improvement in RoCE and RoE of the tyre manufacturers going forward.

Riding on high domestic demand: The Indian Tyre industry is witnessing strong

demand from both the Replacement as well as the OEM markets, keeping

capacities running at peak. Apollo Tyres is poised to achieve market

leadership through increase in production from 820tpd in FY2010 to

1,100tpd in FY2012E.

Strategic overseas investment offers synergies in long term: The acquisitions

done by Apollo in the last 2-3 years are increasingly contributing to its

Revenues. We estimate Vredestein Banden combined with Dunlop SA to

contribute 30% to overall Consolidated Revenues, helping Apollo to further

strengthen its foothold in the Indian Tyre industry. Acquisitions offer synergies

by way of access to Radial tyre technology, wider product portfolio and

presence in newer geographies.

Outlook and Valuation

The tyre industry, during FY2010, benefited largely from the substantial decline in raw material prices and spike in replacement demand. Going ahead, we are positive on the sector as the OEM off-take is expected to improve on better overall auto industry volume growth. The recent run up in raw material prices is however, a concern and expected to exert pressure on OPMs. We expect the company to clock EPS of Rs7.9 in FY2011E and Rs9.8 in FY2012E.

We believe that strong demand, prevailing high capacity utilisation levels and higher investment requirements, would help the Indian tyre industry to arrest the sharp decline in margins despite the upward move in input costs (rubber and carbon black). Thus, we maintain a Buy on Apollo Tyres, with a Target Price of Rs79, at which level the stock would trade at 8x, 5x and 1.4x FY2012E EPS, EV/EBITDA and P/BV, respectively.

Key downside risk to our call: Sharp rise in input costs, slower growth in international business and lower-than-anticipated growth in tyre off-take pose downside risks to our estimates.


8July 30, 2010

Exhibit 8: Angel v/s consensus forecast

Angel estimates Consensus Variation (%)

FY11E FY12E FY11E FY12E FY11E FY12E

Net Sales (Rs cr) 9,260 10,398 9,014 10,23 2.7 1.6

EPS (Rs) 7.9 9.8 8.8 10.8 (10.6) (9.1)

Source: Angel Research, Bloomberg

Exhibit 9: One-year forward P/E band

Source: Company, Angel Research, Bloomberg

Exhibit 10: One-year forward P/E chart


Exhibit 11: One-year forward EV/EBITDA band


Exhibit 12: One-year forward EV/EBITDA chart


Exhibit 13: Tyre - Recommendation summary

Company Reco. CMP (Rs)

Tgt Price (Rs)

Upside (%)

P/E (x) EV/EBITDA (x) RoE (%) FY10-12E

EPS FY11E FY12E FY11E FY12E FY11E FY12E CAGR (%)

Apollo Tyres* Buy 64 79 23.6 8.1 6.5 5.3 4.4 24.1 16.9 (12.9)

JK Tyre* Buy 164 237 44.6 4.2 3.5 4.2 2.8 9.7 15.9 (3.2)

Ceat Buy 134 164 22.2 5.3 3.3 5.1 3.7 18.7 15.0 (7.7)

Source: Company, Angel Research; Note: * FY2011E and FY2012E EPS on consolidated basis

0

40

80

120

160

Apr-0

3

Oct

-03

Apr-0

4

Oct

-04

Apr-0

5

Nov

-05

May

-06

Nov

-06

May

-07

Dec

-07

Jun-

08

Dec

-08

Jun-

09

Jan-

10

Jul-1

0

(Rs) Share Price (Rs) 1x 4x 7x 10x

0

5

10

15

20

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

One-yr forward P/E Five-yr average P/E

0

2,500

5,000

7,500

10,000

Apr

-03

Oct

-03

Apr

-04

Oct

-04

Apr

-05

Nov

-05

May

-06

Nov

-06

May

-07

Dec

-07

Jun-

08

Dec

-08

Jun-

09

Jan-

10

Jul-1

0

(Rs cr) EV (Rs cr) 2x 4x 6x 8x

0

2

4

6

8

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

One-yr forward EV/EBITDA Five-yr average EV/EBITDA


9July 30, 2010

Profit and Loss Statement (Consolidated) Y/E March (Rs cr) FY07 FY08 FY09 FY10 FY11E FY12E

Gross sales 4,781 5,244 5,463 8,510 9,957 11,180

Less: Excise duty 490 549 468 393 697 783

Net Sales 4,291 4,695 4,995 8,117 9,260 10,398

Total operating income 4,291 4,695 4,995 8,117 9,260 10,398

% chg 64.2 9.4 6.4 62.5 14.1 12.3

Total Expenditure 3,892 4,098 4,573 6,933 8,328 9,297

Net Raw Materials 2,866 2,929 3,411 4,577 5,990 6,671

Other Mfg costs 272 338 337 542 532 598

Personnel 406 440 415 1,088 1,065 1,196

Other 348 390 410 726 741 832

EBITDA 400 597 422 1,184 932 1,101

% chg 78.5 49.5 (29.3) 180.4 (21.2) 18.1

(% of Net Sales) 9.3 12.7 8.5 14.6 10.1 10.6 Depreciation & Amortisation

117.2 129.9 128.5 254.2 327.7 362.3

EBIT 282 467 294 930 605 738

% chg 87.2 65.6 (37.2) 216.5 (34.9) 22.1

(% of Net Sales) 6.6 10.0 5.9 11.5 6.5 7.1

Interest & other Charges 120 89 112 134 169 169

Other Income 34 26 31 119 126 133

(% of PBT) 17.1 6.5 14.7 12.9 22.3 18.9

Recurring PBT 196 405 213 914 562 703

% chg 60.7 106.4 (47.3) 328.3 (38.5) 25.1

Extraordinary Items (0.5) (0.3) (0.6) (3.4) - -

PBT 197 406 214 917 562 703

Tax 79 136 74 261 163 207

(% of PBT) 150.4 71.0 (45.3) 251.2 (37.6) 27.2

PAT 118 270 140 657 399 496

Less: Minority interest (MI) - - - - - -

PAT after MI (reported) 118 270 140 657 399 496

Adj. PAT 117 270 139 653 399 496

% chg 31.6 130.4 (48.4) 369.5 (38.9) 24.2

(% of Net Sales) 2.7 5.7 2.8 8.0 4.3 4.8

Basic EPS (Rs) 2.5 5.5 2.8 13.0 7.9 9.8

Fully Diluted EPS (Rs) 2.5 5.5 2.8 13.0 7.9 9.8

% chg 38.5 118.9 (50.0) 369.5 (38.9) 24.2


10July 30, 2010

Balance Sheet (Consolidated) Y/E March (Rs cr) FY07 FY08 FY09 FY10 FY11E FY12E

SOURCES OF FUNDS

Equity Share Capital 46 49 50 50 50 50

Preference Capital - - - - - -

Reserves & Surplus 877 1,129 1,299 1,917 2,366 2,815

Shareholders’ Funds 923 1,178 1,350 1,968 2,417 2,865

Total Loans 823 646 891 1,707 2,107 2,107

Deferred Tax Liability 170 176 194 251 229 203

Total Liabilities 1,916 2,000 2,435 3,926 4,752 5,176

APPLICATION OF FUNDS

Gross Block 1,947 1,955 2,284 5,563 7,123 7,877

Less: Acc. Depreciation 681 750 882 3,120 3,448 3,810

Net Block 1,266 1,205 1,402 2,443 3,675 4,067

Capital Work-in-Progress 80 95 281 536 356 315

Goodwill 26 22 24 118 118 118

Investments 5 5 5 6 6 6

Current Assets 1,647 1,484 1,423 2,439 2,242 2,514

Cash 194 285 362 349 422 503

Loans & Advances 447 171 206 310 400 416

Other 1,006 1,028 855 1,780 1,421 1,595

Current liabilities 1,108 811 700 1,614 1,645 1,843

Net Current Assets 539 673 723 824 597 671

Mis. Exp. not written off - - - - - -

Total Assets 1,916 2,000 2,435 3,926 4,752 5,176


11July 30, 2010

Cash Flow Statement (Consolidated) Y/E March (Rs cr) FY07 FY08 FY09 FY10 FY11E FY12E

Profit before tax 197 406 214 917 562 703

Depreciation 117 130 129 254 328 362

Change in Working Capital (28) 104 (67) 97 (432) 5

Less: Other income (288) 190 (306) (421) (1045) (129)

Direct taxes paid 79 136 74 261 163 207

Cash Flow from Operations 495 313 508 1428 1340 992

(Inc.)/Dec. in Fixed Assets (665) (18) (517) (3533) (1381) (713)

(Inc.)/Dec. in Investments (5) 0 0 (1) 0 0

(Inc.)/Dec. in loans and adv. (38) 18 (28) (111) (90) 16

Other income 34 26 31 119 126 133

Cash Flow from Investing (674) 27 (513) (3527) (1345) (564)

Issue of Equity 244 72 46 0 0 0

Inc./(Dec.) in loans 73 (177) 245 816 400 0

Dividend Paid (Incl. Tax) 24 29 27 44 29 47

Others (200) (173) (234) 1225 (352) (394)

Cash Flow from Financing 141 (249) 83 2086 78 (347)

Inc./(Dec.) in Cash (38) 91 77 (13) 73 81

Opening Cash balance 231 194 285 362 349 422

Closing Cash balance 194 285 362 349 422 503


12July 30, 2010

Key Ratios Y/E March FY07 FY08 FY09 FY10 FY11E FY12E

Valuation Ratio (x)

P/E (on FDEPS) 25.3 11.6 23.1 4.9 8.1 6.5

P/CEPS 12.7 7.8 12.0 3.5 4.4 3.8

P/BV 3.2 2.7 2.4 1.6 1.3 1.1

Dividend yield (%) 0.7 0.8 0.7 1.2 0.8 1.3

EV/Sales 0.8 0.7 0.7 0.6 0.5 0.5

EV/EBITDA 9.0 5.8 8.9 3.9 5.3 4.4

EV / Total Assets 1.9 1.7 1.5 1.2 1.0 0.9

Per Share Data (Rs)

EPS (Basic) 2.5 5.5 2.8 13.0 7.9 9.8

EPS (fully diluted) 2.5 5.5 2.8 13.0 7.9 9.8

Cash EPS 5.0 8.2 5.3 18.1 14.4 17.0

DPS 0.4 0.5 0.4 0.7 0.5 0.8

Book Value 19.9 24.1 26.8 39.0 47.9 56.8

DuPont Analysis

EBIT margin 6.6 10.0 5.9 11.5 6.5 7.1

Tax retention ratio 0.6 0.7 0.7 0.7 0.7 0.7

Asset turnover (x) 2.9 2.7 2.6 2.9 2.3 2.3

RoIC (Post-tax) 11.3 18.1 10.1 23.6 10.9 11.6

Cost of Debt (Post Tax) 9.1 8.0 9.5 7.4 6.3 5.6

Leverage (x) 0.7 0.5 0.3 0.6 0.7 0.6

Operating RoE 13.0 22.8 10.3 32.7 14.0 15.3

Returns (%)

RoCE (Pre-tax) 16.6 23.9 13.2 29.2 13.9 14.9

Angel RoIC (Pre-tax) 15.8 14.0 26.0 14.2 27.3 16.4

RoE 12.7 18.4 16.2 24.0 24.1 16.9

Turnover ratios (x)

Asset Turnover (Gross Block) 2.6 2.4 2.4 2.1 1.5 1.4

Inventory / Sales (days) 45 53 49 36 33 33

Receivables (days) 23 26 20 23 23 23

Payables (days) 51 58 47 43 53 50

WC cycle (ex-cash) (days) 29 28 27 19 13 6

Solvency ratios (x)

Net debt to equity 0.7 0.3 0.4 0.7 0.7 0.6

Net debt to EBITDA 1.6 0.6 1.2 1.1 1.8 1.5

Interest Coverage (EBIT/Interest) 2.4 5.3 2.6 6.9 3.6 4.4


13July 30, 2010

Disclosure of Interest Statement Apollo Tyres 1. Analyst ownership of the stock No 2. Angel and its Group companies ownership of the stock No 3. Angel and its Group companies' Directors ownership of the stock No 4. Broking relationship with company covered No Note: We have not considered any Exposure below Rs 1 lakh for Angel, its Group companies and Directors. Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to 15%) Sell (< -15%)

Research Team Tel: 022 - 4040 3800 E-mail: [email protected] Website: www.angeltrade.com DISCLAIMER

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals.

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Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

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Apollo Tyres

Economy & Finance