Apollo Tyres Limited — Investor Meet, 21-11-2024: Analysts/Institutional Investor Meet/Con. Call Updates

**Financial Performance:** Apollo Tyres reported a consolidated revenue of INR 6440 crore, marking a 3% increase year-over-year. The consolidated EBITDA stood at INR 880 crore, reflecting a margin of 13.6%, down from 14.4% in the previous quarter due to rising raw material (RM) costs, which increased by 8% sequentially. The net debt rose by INR 460 crore to finance inventory, while long-term debt was reduced by INR 760 crore, resulting in a comfortable net debt-to-EBITDA ratio of 0.8x.

**Future Outlook and Growth Drivers:** Management anticipates improved operating performance driven by growth in European operations and expects better demand momentum in the second half of the year, particularly in the replacement segment. Pricing actions are being taken to counter RM inflation, with increases ranging from 2% in the truck segment to larger amounts in passenger car tires.

**Order Book and Operational Updates:** The Indian market saw flat overall volume performance, with mid-single-digit growth in the replacement sector, while double-digit growth was reported in agri replacements. In Europe, a 17% sequential revenue increase in the passenger car segment was noted, which reflects a recovering market.

**Analyst Q&A Insights:**

- **Revenue and Profitability:** Analysts sought clarification on RM cost impacts, and the management indicated expectations of a slight increase in Q3, but a decrease thereafter.

- **Market Position and Competitive Landscape:** Management confirmed maintaining or slightly increasing market share across various product categories, primarily focusing on profitability rather than volume at the expense of margins.

- **Operational Challenges or Risks:** There were discussions on challenges involving other expenses, particularly freight and advertising, which remained high despite volume drops.

- **Capex and Capital Allocation:** The company reaffirms its capital expenditure guidance of INR 1000 crore for FY25, with current levels well controlled.

- **Strategic Priorities and Long-Term Vision:** Apollo is prioritizing premiumisation and sustainability, as shown by recognition from EcoVadis and BW Sustainability World.

**Market or Regulatory Updates:** No significant regulatory updates were indicated, but market trends suggest a gradual recovery post-challenge.

**Strategic Focus Areas:** Emphasis on innovation, cost control, and digital transformation has been noted, alongside management's positive outlook on the operational strategy's effectiveness.

**Investor Insight:** With the company navigating raw material challenges and showing potential for recovery in key segments, there appears to be a favorable risk-reward balance, aligning with a 'buy' position given the anticipated margin improvements and proactive pricing strategies.