Apollo Tyres remains a mixed bet for investors, with UBS maintaining a buy rating while Nomura stays neutral, citing growth challenges. The company’s Q3FY25 results were below expectations, driven by weakness in India’s performance, while European operations remained stable. Despite near-term hurdles, Apollo Tyres is focused on export market expansion and capacity additions to drive long-term growth.
UBS: Buy call, target at ₹525, sees 23% upside
UBS has set a target price of ₹525 per share, indicating an upside potential of 23% from the current market price (CMP) of ₹426. The brokerage noted that while India’s performance was weak in Q3, Europe delivered an in-line performance. Raw material costs are expected to remain stable in Q4, and the company has no immediate plans for price hikes.
Apollo Tyres is strategically focusing on the US and Middle East, particularly Saudi Arabia, as key export markets. Additionally, the company plans to expand passenger car radial (PCR) tyre capacity in India and Europe from FY26, which could enhance its long-term growth prospects.
The European subsidiary Reifen reported £88 million in revenue, up 17% year-on-year, with an EBITDA margin of 7%, showcasing resilience in international markets.
Nomura: Neutral call, target at ₹470, sees 10% upside
In contrast, Nomura has maintained a neutral rating, with a target price of ₹470 per share, reflecting a more modest 10% upside. The brokerage highlighted growth headwinds due to macroeconomic challenges, particularly weak demand in the commercial vehicle (CV) segment and sluggish exports.
While Q3 results were in line with expectations, Nomura believes Apollo Tyres’ strategic focus on profitability over market share could slow its overall recovery in the medium term. Additionally, commodity cost benefits have already been factored into valuations, leaving limited room for further upside.
Nomura also pointed out that Apollo Tyres is currently trading at 6x FY27 EV/EBITDA, which it considers to be within the fair value zone. The company’s 9MFY25 performance has already reflected its profitability-first approach, which, while beneficial for margins, could limit volume growth.
Conclusion: Export-led growth vs. near-term macro challenges
While UBS sees Apollo Tyres as a strong long-term bet, backed by export expansion and capacity investments, Nomura remains cautious, citing growth concerns in the commercial and export segments. Investors looking for long-term growth may find the UBS outlook encouraging, while those prioritizing near-term stability might lean towards Nomura’s cautious stance.
(Disclaimer: This article is for informational purposes only and should not be considered as investment advice. Investors are advised to conduct their own research before making investment decisions.)
