Religare assigns hold to Apollo Tyres; target Rs 36
Religare Research has downgraded their rating on Apollo Tyres to ‘hold’ from ‘buy’ and also revised the target price to Rs 36 from Rs 40 earlier.
By ET Online |
MUMBAI: Religare Research has downgraded their rating on Apollo Tyres to ���hold��� from ���buy��� and also revised the target price to Rs 36 from Rs 40 earlier. Despite an improvement in realisations and volume sales, Apollo Tyres��� April-June 2008-09 results were below the brokerage expectations on the margin front as the company was unable to entirely pass on the increase in input costs to customers.
Profit after tax came in below Religare���s expectation as margins contracted and depreciation charges moved up. The brokerage has revised Apollo Tyres���s earnings estimates downward to factor in the concerns related to the margin decline and increased debt.
Religare believes the premium valuation that the company enjoys over its peers will shrink as its heavy capital expenditure commitments weighs down earnings by raising interest and depreciation costs. The gestation period for setting up a tyre plant is relatively high, the brokerage thus expects the company to fully utilise its capacities from greenfield projects only after 2010-11.
The stock is currently trading at a P/E of 6.7x, EV/EBITDA of 3.6x and P/BV of 0.9x on FY10E.
Profit after tax came in below Religare���s expectation as margins contracted and depreciation charges moved up. The brokerage has revised Apollo Tyres���s earnings estimates downward to factor in the concerns related to the margin decline and increased debt.
Religare believes the premium valuation that the company enjoys over its peers will shrink as its heavy capital expenditure commitments weighs down earnings by raising interest and depreciation costs. The gestation period for setting up a tyre plant is relatively high, the brokerage thus expects the company to fully utilise its capacities from greenfield projects only after 2010-11.
The stock is currently trading at a P/E of 6.7x, EV/EBITDA of 3.6x and P/BV of 0.9x on FY10E.
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