APOLLOTYRE - Apollo Tyres Ltd Share Price

Earnings Transcript Q&A Summary

Question 1: "If you can talk about how you see the future shaping up in terms of regaining market share and your efforts towards that?"

Answer: I believe our recent investment in branding through the sponsorship of the Indian Cricket Team will significantly enhance our reach, especially in rural areas. Post-GST, we're already observing increased demand. For Q3, I anticipate revenue growth similar to or better than Q2. Our ongoing efforts to expand our dealer network and boost product visibility further underpin my optimism for H2.

Question 2: "Can you talk about the volume growth for the India business across channels and how you are looking at the replacement demand across segments?"

Answer: This quarter, we experienced an overall volume growth of 4%. While passenger cars and trucks saw muted growth, our farm sector and two-three wheeler segments rebounded significantly. We expect the replacement demand to increase to mid-to-high single digits as market conditions improve.

Question 3: "How was the replacement and OEM growth this quarter?"

Answer: Replacement growth was 2%, while OEM growth achieved 4%. The slower replacement growth was partly due to GST-related challenges that are expected to resolve in subsequent quarters.

Question 4: "How was the exports growth this quarter and would you say that exports growth can be high single digit for the full year?"

Answer: Export growth was in double digits for the quarter, recovering from Q1's performance. We aim for high single-digit growth for the entire year, driven by improving demand.

Question 5: "Can you share the raw material cost, what was the benefit in Q2 and your expectation for Q3?"

Answer: In Q2, raw material costs decreased by 3% sequentially. For Q3, we expect these costs to stabilize or decrease slightly, which should preserve our margin strength.

Question 6: "On Europe, would you expect a further improvement?"

Answer: The European market remains challenging, showing volume growth of 4%. We expect slight growth going forward, dependent on market conditions, but it's better than the previous quarters.

Question 7: "How is the overall OE recovery shaping up right now both in TBR and PCR?"

Answer: We're noticing a pickup in OEM for trucks, though PCR remains sluggish. Growth is anticipated, but not at the levels seen when demand fully returns.

Question 8: "Can you quantify what kind of margin improvement can we expect once the Enschede facility shuts down?"

Answer: It's tough to give an exact figure for margin improvement post-shutdown; however, we've estimated EUR 55 million in cash costs with a payback period of approximately two years.

Question 9: "How are we seeing competitive intensity, especially related to new entrants?"

Answer: Competitive intensity remains consistent. New entrants might increase pressure, but they must prove product quality and establish distribution networks to compete effectively. We will continue to focus on our strategy.

Question 10: "Would that be right assessment about Q3 margins showing improvement?"

Answer: Yes, the raw material scenario is stable, and with stronger replacement demand, we anticipate improved operating leverage. Therefore, margins should see a strong sequential uplift.