APOLLOTYRE - Apollo Tyres Ltd Share Price

In the Q3 FY26 earnings conference call, Apollo Tyres Ltd management conveyed a positive outlook for the company, highlighting a consolidated revenue growth of nearly 12%, with total revenues reaching INR 77.4 billion. They reported an EBITDA margin of 15.3%, noting it as the highest ever for both standalone and consolidated bases. Domestic operations showed strong double-digit growth across all channels and product categories, while the European market remained steady with a flat topline year-on-year.

Management expects continued robust demand momentum for Q4 FY26, with January also reflecting double-digit growth. Significant forward-looking points include:

1. Capex Initiatives: The Board approved a capex plan of INR 5,800 crores spread over FY27, FY28, and FY29 for expanding both PCR and TBR capacities, indicating an expectation of continued demand. The capex for FY27 is anticipated to be around INR 2,000 crores.

2. Debt Reduction: The net debt for consolidated operations dropped from INR 26 billion in the previous quarter to INR 13 billion, with net debt to EBITDA improving to 0.4x.

3. Market Strategy: The company focuses on premiumization and product excellence, securing more original equipment manufacturer (OEM) approvals and achieving podium positions in European tests.

4. Advertising & Promotion (A&P) Strategy: A&P spend in Q3 was approximately INR 150 crores, expected to normalize to about 2.5% of sales going forward due to recent sponsorship initiatives.

5. Raw Material Costs: Management anticipates steady raw material costs in Q4, with PS margins expected to remain stable despite fluctuations in the global market.

Apollo Tyres is committed to sustainable and profitable growth, emphasizing strong fundamentals and strategic planning for the upcoming years.

Major Q&A from Apollo Tyres Q3 FY26 Earnings Call

Question 1: Raghunandhan NL: Can you elaborate on the increase in capex per tonne regarding the capacity addition?

Answer: I confirm your calculations, the capex per tonne is around INR 17 crore due to inflation and advancements in technology since our last major capex in FY21. Our facilities are designed to meet global OEM standards, addressing both domestic and international markets effectively.

Question 2: Raghunandhan NL: What's the breakdown of volume growth between OEM, replacement, and exports?

Answer: Our volume growth was mid-teens for OEM and replacement, while exports were nearly 20%. The demand has been robust across all channels, which indicates a strong performance overall.

Question 3: Raghunandhan NL: What are your A&P spends as a percentage of standalone sales in Q3, and how do you expect them to evolve?

Answer: A&P for Q3 was roughly 2% of standalone sales, around INR 150 crores, driven by our sponsorship with BCCI. In a normalized scenario, we plan to maintain it at about 2.5% to support revenue growth moving forward.

Question 4: Basudeb Banerjee: How do you expect the raw material costs to trend, and what were key prices in Q3?

Answer: We anticipate steady raw material costs in Q4. Current prices are: natural rubber at INR 195/kg, synthetic rubber at INR 170/kg, carbon black at INR 115/kg, and steel cord at INR 155/kg.

Question 5: Joseph George: Do you expect to move to a lower tax rate with recent MAT changes?

Answer: Yes, our tax team is assessing the situation. We anticipate moving to the 25% tax bracket effective FY27.

Question 6: Basudeb Banerjee: Why is there a shift from bite-sized capex to larger investments?

Answer: We have exhausted opportunities for incremental capacity increases through minor equipment adjustments. Now, significant civil works are required, necessitating larger capex amounts to optimize manufacturing.

Question 7: Amyn Pirani: What is the overall capex guidance for FY27?

Answer: We expect our total capex for FY27 to be around INR 3,000 crore, incorporating growth and maintenance needs across our operations.

Question 8: Yash Agrawal: What is the demand outlook for Europe in Q4?

Answer: Europe remains weak, with a market growth of -4%. Signs of improvement are present, but we do not expect a significant positive shift in the immediate future.

Question 9: Mumuksh: How will the closure of the Netherlands plant impact margins?

Answer: We expect to see benefits from this closure reflected in our financials from the second half of FY27, positively impacting profitability, but we won't provide specific margin forecast numbers now.

Question 10: Nitin Agrawal: Can you disclose your current market share in replacement for TBR and PCR?

Answer: We estimate our TBR replacement share at around 30% and PCR replacement share closer to 20%. We're actively working on regaining any lost share in these segments.

Keep in mind that all answers reflect the figures and context from the provided earnings call, maintaining accuracy within the character limits specified.