Apollo Tyres ADD

4QFY16 result
review

13 May 2016

Institutional Equities

Spike in rubber price creates near-term challenges

Apollo Tyres (ATL) 4QFY16 PAT and Ebitda were in line with our

CMP
estimates; consolidated Ebitda declined 8% YoY to Rs4.8bn, led by
28% increase in other expenses.
12mthTP(Rs)
Standalone revenues declined 5% YoY; volumes grew 5% YoY.
Marketcap(US$m)
Volume growth in the non-truck segment was superior to that of truck
Enterprisevalue(US$m)
segment which cushioned the 9% YoY realisation decline (3/5% price
cut taken 2Q/4Q to pass on decline in raw material costs partially).
Bloomberg
Vredestein revenue was flat YoY (above estimates); the same offset
Sector
by high other expenses bringing consolidated numbers in line.

4QFY16 standalone Ebitda was flat at Rs3.75bn vs. our expectation of

Shareholdingpattern(%)
Rs3.84bn. Benign raw material costs for 4Q continued to support
Promoter
margins despite price cuts.
FII
We expect ATL to record strong volume growth over the medium-toDII
long term led by 27% capacity expansions and entry into the 2W
Others
space; however, near-term profitability however is likely to be
depressed due to steep increase in rubber prices (33% up QoQ) and
other crude-based raw material costs. We cut our FY17 estimates by
27% to reflect the same. The stock trades at 7x PER on our FY18
estimates. Retain ADD.
Financialsummary(Rsm)
Y/e31Mar,Consolidated
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
Indiaops(tyretonnage assumed)
108,227
106,355
101,955
106,748
104,439
110,610
109,092
%growth
5.0
5.0
1.0
5.0
(3.5)
4.0
7.0
Indiaops(realizationpertonne)
211,968
210,147
206,810
212,314
204,642
203,144
196,976
%growth
0.9
1.0
(2.6)
(1.7)
(3.5)
(3.3)
(4.8)
Indiaops(rawmaterialspertonne)
142,413
133,236
131,968
128,566
116,298
120,320
113,736
%growth
(1.7)
(5.3)
(8.1)
(12.4)
(18.3)
(9.7)
(13.8)
Revenues(Rsm)
32,351
33,006
31,597
31,597
28,454
29,959
29,488
%change
1.4
(3.9)
(9.1)
(1.6)
(12.0)
(9.2)
(6.7)
Ebitda(Rsm)
4,163
4,788
5,454
5,169
5,025
4,828
5,057
EbitdaMargins(%)
12.9
14.5
17.3
16.4
17.7
16.1
17.1
Interestexpense(Rsm)
(530)
(496)
(454)
(348)
(243)
(240)
(194)
Effectivetaxrate(%)
25.1
27.6
29.4
20.4
30.0
33.2
28.2
ReportedPAT(Rsm)
2,279
2,579
2,392
3,075
2,906
2,787
2,786
PreexceptionalPAT(Rsm)
2,279
2,579
3,182
3,110
2,906
2,310
2,786
%change
37.4
17.5
6.6
14.9
27.5
(10.4)
(12.4)

Rs159

Krithika Subramanian | krithika.subramanian@iiflcap.com

91 22 46464696

1M

3M

1Y

Absolute(Rs)

(5.7)

7.1

(6.5)

Absolute(US$)

(6.0)

8.0

(9.1)

Rel.toSensex

(8.2)

(5.1)

(2.4)

Cagr(%)

3yrs

5yrs

EPS

33.5

13.1

173(9%)
1,212
1,360
APTYIN
Tyre

44.2
32.2
7.7
15.9

4QFY16
112,086
5.0
192,282
(9.4)
106,407
(17.2)
29,897
(5.4)
4,773
16.0
(239)
30.0
2,452
2,452
(21.2)

Source:Company,IIFLResearch.Pricedason12May2016
J Radhakrishnan | radhakrishnan@iiflcap.com
91 22 4646 4653

Priceperformance(%)

Stockperformance
52WkHigh/Low(Rs)
Shareso/s(m)
Dailyvolume(US$m)
DividendyieldFY16ii(%)
Freefloat(%)

1QFY17ii
112,794
8.0
197,638
(3.4)
116,286
0.0
29,848
4.9
4,071
13.6
(285)
42.2
1,593
1,593
(45.2)

FY15
423,286
4.0
211,153
(0.2)
180,076
(3.7)
127,851
(3.9)
19,305
15.1
(1,827)
26.5
9,776
10,601
6.3

FY16ii
436,226
3.1
199,169
(5.7)
163,393
(9.3)
117,798
(7.9)
19,683
16.7
(916)
30.4
10,931
10,453
(1.4)

223/127
509
7
1.3
55.9

FY17ii
482,184
10.5
200,609
0.7
171,482
5.0
127,424
8.2
18,342
14.4
(1,292)
30.9
8,918
8,918
(14.7)

Apollo Tyres ADD

Institutional Equities

Source:Company,IIFLResearch

Revenues in line; robust volume growth outlook for the next two
years: 4QFY16 standalone revenues declined 5% YoY to Rs21.6bn (inline) led by price cuts taken during the year, largely in line with peers.
ATL had taken price cuts of 2-3% in 2QFY16 and 4-5% in 4QFY16 in the
CV and PCR segment. The company took no price cuts after Jan, given
an increase in raw material costs. In the post-result earnings call,

1. Strong improvement in the non-truck segment, bullish outlook for

growth in the farm tyre segment and strong growth in TBR from
2HFY17 following the Chennai brownfield expansion.
2. 15-20% capacity expansions, largely in the TBR segment
3. Likely imposition of anti-dumping duty (the government has initiated
a probe this week into dumping of CV radial tyres from China
4. Entry into the 2W segment in March 2016, and management
indication of good response for 2W tyres so far.
Figure2: 4QFY16standaloneresultsnapshot

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

25.0
20.0
15.0
10.0
5.0
0.0
(5.0)
(10.0)
(15.0)

2QFY14

(%)

1QFY14

YoY(%)
(4.9)
5.0
(9.4)
(5.9)
(10.3)
(17.2)
(0.1)
(4.9)
83bps
7.7
521bps
22.0

(21.5)

(248.5)

10.6
0.7

15.5

15.5

15.5

4QFY13

QoQ(%)
0.3
2.7
(2.4)
0.7
(2.0)
(6.4)
(1.6)
(4.2)
34bps
6.0
240bps
3.8

16.5

423.9

1.8
(8.2)

6.8

6.8

6.8

3QFY13

4QFY16
21,552
112,086
192,282
17,798
158,786
106,407
3,754
33,496
17.4
9,625
45
716
3.3
235
1.1
213
1.0
3,016
910
30.2
2,106

2,106
509
4.1

2QFY13

3QFY16
21,489
109,092
196,976
17,674
162,010
113,736
3,815
34,966
17.8
9,081
42
690
3.2
202
0.9
41
0.2
2,963
991
33.5
1972
0
1972
509
3.9

management indicated expectation of double-digit volume growth in

FY17 owing to:

1QFY13

Figure1: 4QFY16standaloneresultsnapshot
(Rsmn)
4QFY15
Netsales
22,664
Salevolumes(mtonne)
106,748
Realisation(Rs/tonne)
212,314
TotalExpenditure
18,906
Cost(Rs/tonne)
177,107
Rawmaterials(Rs/tonne)
128,566
Ebitda
3,758
Ebitda(Rs/tonne)
35,207
Ebitdamargin(%)
16.6
Grossprofit
8,940
GrossMargins
39
Depreciation
587
Asa%ofSales
2.6
Interest
300
Asa%ofSales
1.3
Otherincome
144
Asa%ofSales
0.6
PBT
2,728
Tax
904
Asa%ofPBT
33.1
PreExceptionalPAT
1824
EO/priorperioditems
0
PATafterEO
1824
Dilutednumberofshares(Mn)
509
EPS(Rs)quarterly
3.6

Source:Company,IIFLResearch

Ebitda in line; margins likely to be under pressure with raw

material cost increase: Consolidated Ebitda declined 8% YoY to
Rs4.8bn (in line). Benign raw material costs supported standalone
Ebitda, which were flat YoY despite the price cuts; however, a sharp
increase in other expenses depressed Ebitda for the European
operations. Raw material costs for the quarter declined 5% sequentially.

radh ak rishn an@iif lcap. com

Apollo Tyres ADD

Institutional Equities

crude-linked derivatives such as carbon black and synthetic rubber have

started increasing. ATL has rubber inventory only for three weeks of
1QFY17 and crude-based raw materials for full 1QFY17. We cut our
FY17/18 earnings estimates by 27%/20%, to reflect the spike in raw
material costs and likely lag in passing on cost increases.

Figure3: ATLrawmaterialcostsfor4QFY16
4QFY15

4QFY16

11%

(Rsperkg)
270

17%

12%

240

Figure5: Naturalrubberpricetrend

27%

25,000
130

120

115

100

Rsperquintal
75

21,000
55
17,000

Naturalrubber

Syntheticrubber

Carbonblack

13,000

NTCF

Source:Company,IIFLResearch

9,000

Figure4: StandaloneEbitdamargintrend

5,000

Ebitdamargin(%)

Source:Bloomberg,IIFLResearch

Figure6: Syntheticrubberpricetrend

Mar16

Since April 2016, rubber prices increased sharply owing to curtailment

in exports from key producing nations Indonesia and Thailand and
increase in crude oil price and Chinese demand. Additionally, with crude
prices by more than 20% in the past one month, raw material costs of

Feb16

Source:Company,IIFLResearch

Jan16

FY16

Dec15

FY15

Nov15

FY14

Oct15

FY13

Sep15

FY12

Aug15

FY11

Jul15

FY10

Jun15

FY09

May15

FY08

Apr15

FY07

1,500
1,400
1,300
1,200
1,100
1,000
900
800
700
600

Mar15

(USD/tonne)

1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q

20
18
16
14
12
10
8
6
4
2
0

Apr07
Jul07
Oct07
Jan08
Apr08
Jul08
Oct08
Jan09
Apr09
Jul09
Oct09
Jan10
Apr10
Jul10
Oct10
Jan11
Apr11
Jul11
Oct11
Jan12
Apr12
Jul12
Oct12
Jan13
Apr13
Jul13
Oct13
Jan14
Apr14
Jul14
Oct14
Jan15
Apr15
Jul15
Oct15
Jan16
Apr16

350
310
270
230
190
150
110
70
30
(10)

Source:Industry,IIFLResearch

radh ak rishn an@iif lcap. com

Apollo Tyres ADD

Institutional Equities
Figure7: ConsolidatedEbitdamargintrend

Figure8: Regionwiseperformancein4QFY16
Rsmn
4QFY15
3QFY16
Revenues
India
22,455
21,469
Europe
8,490
8,537
Ebit
India
3,028
3,166
Europe
1,029
988
Ebitmargins
India
13.5
14.7
Europe
12.1
11.6

(%)
18.0
16.0
14.0
12.0
10.0
8.0

21,552
8,562

QoQ(%)

0.39
0.29

YoY(%)

4.02
0.84

3,251
413

2.69
58.18

7.39
59.86

15.1
4.8

33bps
675bps

160bps
730bps

FY17ii

FY16

FY15

FY14

FY13

FY12

FY11

FY10

FY09

FY08

FY07

FY06

Source:Company,IIFLResearch

FY05

6.0

4QFY16

Source:Bloomberg,IIFLResearch

Tech anomalies hinder Vredestein revenue growth: Subsidiary

revenues declined 7% YoY owing to a 17% YoY decline in volumes and
some part of South African operations revenue included in the previous
year. Revenue of the European operations was flat YoY (including
Reifencom revenues of ~Rs1.6bn which contributed to 19% of the
revenues). The management indicated that sharp volume decline was
on account of ERP implementation in the month of Jan which was facing
technical issues such as displaying of accurate inventory in terms of
quantum as well as its location. Management indicated that these issues
would be resolved by 1QFY17. Other expenses during increased 59%
YoY depressing Vredestein profitability. ATL expects good volume
growth in the European operations (currently functioning at 90%
utilisation). The Hungary expansion is due to commission in early 2017.

Capacity expansions on schedule; free cash flows to turn

negative in FY17: ATL is likely to increase domestic capacity by ~19%
by 3QFY17 through increase in the Oragadam TBR capacity. The
company is likely to incur capex of Rs14bn in FY17 for this. Greenfield
expansion in Hungary of ~270tpd is likely to come on stream in early
2017. Capex for Hungary expansion in FY17 is likely to be EUR200mn.
Consolidated free cash is likely to be negative for the next two years,
given these aggressive capacity expansions.

Valuation summary (Rs m)

Y/e31Mar,Consolidated
FY14A
FY15A
FY16ii
FY17ii
FY18ii
Revenues(Rsm)
133,103 127,851 117,798 127,424 142,318
Ebitdamargins(%)
13.3
15.1
16.7
14.4
15.3
PreexceptionalPAT(Rsm)
10,601
10,453
8,918
11,023
9,976
ReportedPAT(Rsm)
10,051
9,776
10,931
8,918
11,023

20.8
20.5
17.5
21.7
19.8
PreexceptionalEPS(Rs)

67.1
5.2
(1.4)
(14.7)
23.6
Growth(%)

(5.5)
(18.5)
IIFLvsconsensus(%)

8.0
7.6
7.7
9.1
7.3
PER(x)
22.1
18.8
13.7
14.8
25.1
ROE(%)

0.2
0.1
0.1
0.3
0.3
Netdebt/equity(x)
4.7
4.5
5.6
4.8
5.4
EV/Ebitda(x)
1.8
1.6
1.3
1.2
1.0
Price/book(x)
Source:Companydata,IIFLResearch

radh ak rishn an@iif lcap. com

Company snapshot

Institutional Equities

Apollo Tyres ADD

Background:
ATL is the largest CV tyre manufacturer in India with 27% market share in the T&B bias segment and 25% market share in the T&B

radial
segment.
In the PCR segment, ATL is the third-largest player with 18% market share. Its total production capacity is spread across four tyre

plants
in India, one in Netherlands and an upcoming plant in Hungary. Current capacity of the company is ~1640tpd and the same is likely to go

upto
~2077tpd post expansion. Its product portfolio includes T&B bias and radial, LCV bias and radial, PV radial, farm bias and radial and OTR bias.

The
company does not make tyres for two wheelers. It has a wide product range and sells under various brands including popular brands, among

them
Amar, Amazer and Accelere.

Management

Capacity & Volume Trend

400

Car/Jeep
,34

Assumptions
Y/e31Mar,
FY14A
FY15A
FY16ii
FY17ii
FY18ii
Consolidated
Indiaops(tyre
tonnage
406,975 423,286 436,226 482,184 544,867
assumed)
Indiaops
(Realisationper 211,563 211,153 199,169 200,609 204,621
tonne)
Indiaops(Raw
187,059 180,076 163,393 171,482 173,109
matpertonne)
Source:Companydata,IIFLResearch

300
200
100
0

LCV,7

PE chart
PE (x)

FY16

Truck
and
Buses,
48

FY15

CFO

500

FY14

GauravKumar

(%)

('000tonnes)

FY13

ViceChairman&ManagingDirector

Tyrevolume(LHS)

FY12

NeerajKanwar

600

Others,1

Off
Highway,
10

FY11

Chairman&ManagingDirector

Tyrecapacity(LHS)
Growth(RHS)

FY10

OnkarSKanwar

Revenue Share - FY16 (%)

FY09

Designation

FY08

Name

35
30
25
20
15
10
5
0
(5)
(10)

EV/Ebitda

Avg

1sd

-1sd

EV/Ebitda (x)

Avg

1sd

Jun12

Jun14

-1sd

11.2
6.2

9.2

5.2

7.2

4.2

5.2

3.2

3.2
1.2
Jun08

2.2

May10

May12

May14

radh ak rishn an@iif lcap. com

May16

1.2
Jun08

Jun10

Apollo Tyres ADD

Institutional Equities

Financial summary

Incomestatementsummary(Rsm)
Y/e31Mar,Consolidated
Revenues
Ebitda
Depreciationandamortisation
Ebit
Nonoperatingincome
Financialexpense
PBT
Exceptionals
ReportedPBT
Taxexpense
PAT
Minorities,Associatesetc.
AttributablePAT
Ratioanalysis
Y/e31Mar,Consolidated
Persharedata(Rs)
PreexceptionalEPS
DPS
BVPS
Growthratios(%)
Revenues
Ebitda
EPS
Profitabilityratios(%)
Ebitdamargin
Ebitmargin
Taxrate
Netprofitmargin
Returnratios(%)
ROE
ROCE
Solvencyratios(x)
Netdebtequity
NetdebttoEbitda
Interestcoverage
Source:Companydata,IIFLResearch

FY14A
FY15A
133,103 127,851
17,739
19,305
(4,109)
(3,883)
13,630
15,422
1,453
538
(2,838)
(1,827)
12,245
14,133
74
(825)
12,319
13,308
(2,269)
(3,532)
10,051
9,776
0
0
10,051
9,776
FY14A

19.8
0.8
90.5

4.0
21.8
67.1

13.3
10.2
18.4
7.6

25.1
22.3

0.2
0.6
4.8

FY16ii
117,798
19,683
(4,239)
15,444
700
(916)
15,229
478
15,707
(4,776)
10,931
0
10,931

FY17ii
127,424
18,342
(4,911)
13,431
763
(1,292)
12,903
0
12,903
(3,985)
8,918
0
8,918

FY18ii
142,318
21,794
(5,299)
16,495
763
(1,145)
16,113
0
16,113
(5,090)
11,023
0
11,023

FY15A

FY16ii

FY17ii

FY18ii

20.8
2.0
99.0

20.5
2.0
119.0

17.5
2.0
136.0

21.7
2.0
157.1

(3.9)
8.8
5.2

(7.9)
2.0
(1.4)

8.2
(6.8)
(14.7)

11.7
18.8
23.6

15.1
12.1
26.5
7.6

16.7
13.1
30.4
9.3

14.4
10.5
30.9
7.0

15.3
11.6
31.6
7.7

22.1
23.4

18.8
22.6

13.7
17.4

14.8
17.9

0.1
0.3
8.4

0.1
0.2
16.9

0.3
1.0
10.4

0.3
0.9
14.4

Balancesheetsummary(Rsm)
Y/e31Mar,Consolidated
Cash&cashequivalents
Inventories
Receivables
Othercurrentassets
Creditors
Othercurrentliabilities
Netcurrentassets
Fixedassets
Intangibles
Investments
Otherlongtermassets
Totalnetassets
Borrowings
Otherlongtermliabilities
Shareholdersequity
Totalliabilities

FY14A
6,541
20,664
10,427
4,301
12,538
9,244
20,151
45,022
1,376
637
1,372
68,557
17,677
5,241
45,638
68,557

FY15A
5,946
17,782
9,589
2,767
8,640
9,484
17,960
44,867
1,165
1,470
2,268
67,730
12,395
4,912
50,423
67,730

Cashflowsummary(Rsm)
Y/e31Mar,Consolidated
Ebit
Taxpaid
Depreciationandamortization
Networkingcapitalchange
Otheroperatingitems
Operatingcashflowbeforeinterest
Financialexpense
Nonoperatingincome
Operatingcashflowafterinterest
Capitalexpenditure
Longterminvestments
Others
Freecashflow
Equityraising
Borrowings
Dividend
Netchgincashandequivalents

FY14A
13,630
(2,386)
4,109
1,170
(1,779)
14,743
(2,838)
1,453
13,358
(1,524)
0
538
12,372
0
(8,897)
(283)
3,193

FY15A
FY16ii
FY17ii
FY18ii
15,422
15,444
13,431 16,495
(2,954) (4,776) (3,985) (5,090)
3,883
4,239
4,911
5,299
1,596 (1,935) (1,646) (2,081)
(2,642)
0
0
0
15,305
12,972
12,711 14,623
(1,827)
(916) (1,292) (1,145)
538
700
763
763
14,016
12,757
12,183 14,241
(6,201) (10,000) (27,000) (15,000)
(796)
0
0
0
117
0
0
0
7,135
2,757 (14,817)
(759)
323
0
0
0
(7,607) (3,000)
5,000
5,000
(447)
(283)
(283)
(283)
(595)
(526) (10,100)
3,958

FY16ii
5,420
16,073
8,835
2,767
7,810
5,916
19,369
50,628
1,165
1,470
2,268
74,900
9,395
4,912
60,593
74,900

FY17ii
FY18ii
(4,680)
(723)
17,870
19,744
9,557
10,674
2,767
2,767
8,683
9,594
5,916
5,916
10,915
16,953
72,717
82,418
1,165
1,165
1,470
1,470
2,268
2,268
88,535 104,275
14,395
19,395
4,912
4,912
69,228 79,968
88,535 104,275

Source:Companydata,IIFLResearch

radh ak rishn an@iif lcap. com

Apollo Tyres ADD

Institutional Equities
Disclosure : Published in 2016, India Infoline Ltd 2016

India Infoline Group (hereinafter referred as IIFL) is engaged in diversified financial services business including equity broking, DP services, merchant banking, portfolio management services, distribution of Mutual Fund,
insurance products and other investment products and also loans and finance business. India Infoline Ltd (hereinafter referred as IIL) is a part of the IIFL and is a member of the National Stock Exchange of India Limited
(NSE) and the BSE Limited (BSE). IIL is also a Depository Participant registered with NSDL & CDSL, a SEBI registered merchant banker and a SEBI registered portfolio manager. IIL is a large broking house catering to
retail, HNI and institutional clients. It operates through its branches and authorised persons and sub-brokers spread across the country and the clients are provided online trading through internet and offline trading
through branches and Customer Care.
a)

This research report (Report) is for the personal information of the authorized recipient(s) and is not for public distribution and should not be reproduced or redistributed to any other person or in any form without
IILs prior permission. The information provided in the Report is from publicly available data, which we believe, are reliable. While reasonable endeavors have been made to present reliable data in the Report so far as
it relates to current and historical information, but IIL does not guarantee the accuracy or completeness of the data in the Report. Accordingly, IIL or any of its connected persons including its directors or subsidiaries
or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained, views and opinions expressed in this
publication.

b)

Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and
estimates contained in this report reflect a judgment of its original date of publication by IIFL and are subject to change without notice. The price, value of and income from any of the securities or financial
instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of
such securities or financial instruments.

c)

The Report also includes analysis and views of our research team. The Report is purely for information purposes and does not construe to be investment recommendation/advice or an offer or solicitation of an offer to
buy/sell any securities. The opinions expressed in the Report are our current opinions as of the date of the Report and may be subject to change from time to time without notice. IIL or any persons connected with it
do not accept any liability arising from the use of this document.

d)

Investors should not solely rely on the information contained in this Report and must make investment decisions based on their own investment objectives, judgment, risk profile and financial position. The recipients
of this Report may take professional advice before acting on this information.

e)

IIL has other business segments / divisions with independent research teams separated by 'Chinese walls' catering to different sets of customers having varying objectives, risk profiles, investment horizon, etc and
therefore, may at times have, different and contrary views on stocks, sectors and markets.

f)

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication,
availability or use would be contrary to local law, regulation or which would subject IIL and its affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may
not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this Report may come are required to inform themselves of and to observe such restrictions.

g)

As IIL along with its associates, are engaged in various financial services business and so might have financial, business or other interests in other entities including the subject company(ies) mentioned in this Report.
However, IIL encourages independence in preparation of research report and strives to minimize conflict in preparation of research report. IIL and its associates did not receive any compensation or other benefits
from the subject company(ies) mentioned in the Report or from a third party in connection with preparation of the Report. Accordingly, IIL and its associates do not have any material conflict of interest at the time of
publication of this Report.

h)

As IIL and its associates are engaged in various financial services business, it might have:(a) received any compensation (except in connection with the preparation of this Report) from the subject company in the past twelve months; (b) managed or co-managed public offering of securities for the subject
company in the past twelve months; (c) received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) received any
compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) engaged in market making activity for the
subject company.

i)

IIL and its associates collectively do not own (in their proprietary position) 1% or more of the equity securities of the subject company mentioned in the report as of the last day of the month preceding the publication
of the research report.

j)

The Research Analyst engaged in preparation of this Report or his/her relative:(a) does not have any financial interests in the subject company (ies) mentioned in this report; (b) does not own 1% or more of the equity securities of the subject company mentioned in the report as of the last day
of the month preceding the publication of the research report; (c) does not have any other material conflict of interest at the time of publication of the research report.

k)

The Research Analyst engaged in preparation of this Report:(a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months; (c)
has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products or
services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) has not received any compensation or other benefits from the subject
company or third party in connection with the research report; (f) has not served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the subject company.

L)

IIFLCAP accepts responsibility for the contents of this research report, subject to the terms set out below, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor. The analyst
whose name appears in this research report is not registered or qualified as a research analyst with the Financial Industry Regulatory Authority (FINRA) and may not be an associated person of IIFLCAP and,
therefore, may not be subject to applicable restrictions under FINRA Rules on communications with a subject company, public appearances and trading securities held by a research analyst account.
We submit that no material disciplinary action has been taken on IIL by any regulatory authority impacting Equity Research Analysis.

radh ak rishn an@iif lcap. com

Apollo Tyres ADD

Institutional Equities

A graph of daily closing prices of securities is available at http://www.nseindia.com/ChartApp/install/charts/mainpage.jsp, www.bseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock-quotes.
(Choose a company from the list on the browser and select the three years period in the price chart).
Name, Qualification and Certification of Research Analyst:J Radhakrishnan(CWA, CFA), Krithika Subramanian(Chartered Accountant)
India Infoline Limited (Formerly India Infoline Distribution Company Limited), CIN No.: U99999MH1996PLC132983, Corporate Office IIFL Centre, Kamala City, Senapati Bapat Marg, Lower Parel,
Mumbai 400013 Tel: (91-22) 4249 9000 .Fax: (91-22) 40609049, Regd. Office IIFL House, Sun Infotech Park, Road No. 16V, Plot No. B-23, MIDC, Thane Industrial Area, Wagle Estate, Thane 400604 Tel: (91-22)
25806650. Fax: (91-22) 25806654 E-mail: mail@indiainfoline.com Website: www.indiainfoline.com, Refer www.indiainfoline.com for detail of Associates.
National Stock Exchange of India Ltd. SEBI Regn. No. : INB231097537/ INF231097537/ INE231097537, Bombay Stock Exchange Ltd. SEBI Regn. No.:INB011097533/ INF011097533/ BSE-Currency, MCX Stock
Exchange Ltd. SEBI Regn. No.: INB261097530/ INF261097530/ INE261097537, United Stock Exchange Ltd. SEBI Regn. No.: INE271097532, PMS SEBI Regn. No. INP000002213, IA SEBI Regn. No. INA000000623, SEBI
RA Regn.:- INH000000248
Key to our recommendation structure
BUY - Absolute - Stock expected to give a positive return of over 20% over a 1-year horizon.
SELL - Absolute - Stock expected to fall by more than 10% over a 1-year horizon.
In addition, Add and Reduce recommendations are based on expected returns relative to a hurdle rate. Investment horizon for Add and Reduce recommendations is up to a year. We assume the current hurdle rate at
10%, this being the average return on a debt instrument available for investment.
Add - Stock expected to give a return of 0-10% over the hurdle rate, i.e. a positive return of 10%+.
Reduce - Stock expected to return less than the hurdle rate, i.e. return of less than 10%.
Distribution of Ratings: Out of 190 stocks rated in the IIFL coverage universe, 108 have BUY ratings, 8 have SELL ratings, 51 have ADD ratings and 23 have REDUCE ratings.
Price Target: Unless otherwise stated in the text of this report, target prices in this report are based on either a discounted cash flow valuation or comparison of valuation ratios with companies seen by the analyst as
comparable or a combination of the two methods. The result of this fundamental valuation is adjusted to reflect the analysts views on the likely course of investor sentiment. Whichever valuation method is used there is
a significant risk that the target price will not be achieved within the expected timeframe. Risk factors include unforeseen changes in competitive pressures or in the level of demand for the companys products. Such
demand variations may result from changes in technology, in the overall level of economic activity or, in some cases, in fashion. Valuations may also be affected by changes in taxation, in exchange rates and, in certain
industries, in regulations. Investment in overseas markets and instruments such as ADRs can result in increased risk from factors such as exchange rates, exchange controls, taxation, and political and social conditions.
This discussion of valuation methods and risk factors is not comprehensive further information is available upon request.

ApolloTyres:3yearpriceandratinghistory
Price

TP/Recochangeddate

May13
Jun13
Jul13
Aug13
Sep13
Oct13
Nov13
Dec13
Jan14
Feb14
Mar14
Apr14
May14
Jun14
Jul14
Aug14
Sep14
Oct14
Nov14
Dec14
Jan15
Feb15
Mar15
Apr15
May15
Jun15
Jul15
Aug15
Sep15
Oct15
Nov15
Dec15
Jan16
Feb16
Mar16
Apr16
May16

(Rs)
300
250
200
150
100
50
0

13 May
13 Jun
13 Nov
13 Feb
16 May
12 Nov
09 Feb
13 May
03 Nov
11 Feb

Date

Close price
(Rs)

Target price
(Rs)

2013
2013
2013
2014
2014
2014
2015
2015
2015
2016

94
92
70
118
177
233
214
170
170
150

107
83
68
140
210
268
260
232
190
191

radh ak rishn an@iif lcap. com

Rating
BUY
SELL
SELL
ADD
ADD
ADD
ADD
ADD
ADD
ADD