Buy Apollo Tyres; target of Rs 300: ICICI Securities
ICICI Securities’ research report on Apollo Tyres
ATL is expected to benefit from the strong demand of the T&B tyre. The strong OEM demand led by overloading restriction & governments focus on infrastructure is likely to drive the CV volumes higher thereby benefiting tyre players like ATL. Further it is well placed to benefit from the radialisation story in India. It enjoys 25% market share in truck tyre segment (in both TBB & TBR). The replacement segment is also expected to pick up as the overall improvement in the fleet operators activity will result into higher tyre replacement demand.
ATL is investing in more diversified, rapid growth areas coupled with a larger scale of business in coming years. The management expects strong demand momentum to continue going forward. Its margins are expected to gradually move northwards thereby driving profitability. Thus, we revise our earnings estimates upwards. We maintain BUY rating and value the stock at 12x FY20E EPS to arrive at a target price of Rs 300.
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