ANALYSIS ON APOLLO

TYRES LTD.

PRESENTED BY
ABHINAV DAHIYA
CHAITANYA VENKAT
SAI ABHISHEK
VIKAS SHARMA
ABOUT APOLLO TYRES LTD
World's 17th biggest tyre manufacturer, with annual consolidated revenues of Rs 117.1
billion (US$1.8 billion) in March 2016
Founded in 1972
First plant was commissioned inPerambra,Thrissur,Kerala,India
Company now has four manufacturing units in India, and 1 in Netherlands
A network of nearly 5,000 dealerships in India, of which over 2,500 are exclusive outlets
Gets 61% of its revenues from India, 31% from Europe and 8% from other geographies
Apollo announced its entry into the two-wheeler tyre segment with contract
manufacturing in March 2016
HISTOR
Y:
Company was
conceived and
promoted by Mathew T Expanded
Marattukalam, Bharat operations
Steel Tubes, Ltd. outside India
Raunaq International by
Pvt. Ltd., Raunaq & Co. 2nd plant at acquiringDunl
Pvt. Ltd., Raunaq Singh Limda,Gujarat op's Africa
and Jacob Thomas. , India operations

1976 1977 1991 1995 2006

1st plant Acquired
established Premier Tyres
atPerambra,K Limited- PTL. It
erala, India is the 3rd plant
atKalamasser
y,Kerala, India
HISTO
RY:
Disposed of the
Dunlop brand in
Africa along with
most of the South
African operation in a
A new plant sale toSumitomo
atChennaiTamil Rubber Industriesof
Nadu, India Japan.

2008 2009 2013 2015

Apollo Tyres acquired Apollo has bought

the Netherlands- Germanys
based tyre Reifencom for 45.6
makerVredestein million
Banden B.V.(VBBV)
for an undisclosed
sum
MANAGEMENT DISCUSSION AND ANALYSIS
As on 31st march 2016, Company has 41 subsidiaries including step subsidiary, 1
joint venture and 1 associate
Fiscal Year (FY) 2015-16 was a year of multiple emotions-cautious optimism,
uncertainty and pessimism, depending on which part of the globe you looked at
Apollo Tyres continued to focus on consolidating its leadership position in-key
markets
By expanding market share through new products, focusing on enhancing its retail
presence and becoming a full range player in India with the launch of the two-
wheelers tyre range
Company acquired the Germany-based tyre distributor, Reifencom GmbH to
support its plan of ramping up our retail network in Europe
INDUSTRY OVERVIEW
Demand from CV industry accounts for 60% of the tyre Industry demand, and is based on the growth of the
economy
Major players are MRF, JK Tyres, and Apollo Tyres & CEAT, which account for 63 per cent of the organized tyre
market. The other key players include Modi Rubber, Kesoram Industries and Goodyear India, with 11 per cent, 7
per cent and 6 per cent share respectively
With growth slowing and anticipating the shift towards radialisation manufacturers adding capacity of 6 mn TBR
(truck and bus radial), utilisation rates could be lower in the next 2-3 years
Also, over the past two years the manufacturers have been in a capex phase, companies tried to add radial capacity
due to the sudden shift in demand towards radial tyres and hence the industry managed good pricing discipline
It will be interesting to see if this discipline continues with lower utilisations.
On geographical basis, total income from Asia Pacific, Middle East and Africa (APMEA) operations grew by 5.0% YoY
at Rs.25.5 bn led by India business. The volume in India business grew by 13% YoY led by strong growth of 32% YoY
and 16% YoY in Farm tyre and Passenger Car segment respectively
The management has stated that the demand outlook has improved significantly for both, domestic as well as
European operations
INDUSTRY OVERVIEW
Overall Indian Auto industry witnessed muted growth in FY16 at 3.8% as compared to
7.2% in FY15
Production levels in the Medium and Heavy Commercial Vehicles (M&HCV) segment
declined by 3%, while the Light Truck segment was down by 8.6% in volume terms
The Euro Area grew by 1.6%, while the European Union (EU) posted a rate of 1.9%, as
estimated by Eurostat
The replacement market continues to support the tyre makers as it accounts for 72%
of M&HCV and 57% of PV segments
Export obligation fulfilment period was reduced to 6 months from 18 months
Government restricted the imports of natural rubber only to Chennai and Nhava
Sheva seaports, thus imposing extra logistics and handling costs
INDUSTRY
OVERVIEW

As can be seen that the Industry

grew at remarkable 12% CAGR in
India since 2011 as compared to
Global 4-5% CAGR. It is expected
that global sector will grow at 6.8
% till 2022 where as it is
predicted that the Indian sector
will grow at 9%. The global
industry is also taking a big hit
because for rising prices in the
global market for raw material
which reflects the predictions.
SWOT ANALYSIS
SWOT ANALYSIS
Strengths

S
An entry into
Apollo Tyres
the two wheeler Apollo Tyres
has the
tyre enjoys an
advantage of a
segment, the extensive
diversified
Company is distribution
market base
now a full range network
across
tyre player in
geographies
India

In Europe, the Company has modern

Companys acquired Research &
brand reifencom Development
Vredestein GmbH, one of (R&D) facilities
has an the largest tyre for PV and CV
established distributors tyres
presence in Germany
SWOT ANALYSIS
Weaknesses

W
Company is needs to unable to
currently not establish a effectively block
present in larger presence low quality low
the European in new growing cost
OEM market for geographies to Chinese tyres
regular reach economic through
passenger car sized Government
tyres operations intervention
SWOT ANALYSIS
Opportunities

O
In the truck-bus Positioned to
radial segment PV tyres sold in grow in the
has a healthy Europe could European
lead over its develop into a market due to a
competition sizable market new cost
in terms of for the same competitive
capacity and manufacturing
market share facility

looking at
Increasing its Can convert introducing
focus towards excess bias products and
new capacity into make an entry
geographies more profitable into the
like the industrial European Truck
Middle East and tyres capacity and Bus
South East Asia segments
SWOT ANALYSIS
Threats

T
Increased
Economic competition Increased
downturn or from global competition of
slowdown in the players truck radial
key markets like Michelin imports from
Europe and and China resulting
India Bridgestone in in a decline in
India. volumes

Threat of raw Weak Indian Growing

material price currency influence of
volatility, resulting in budget tyres,
translating into pressure mainly
pressured on margins tier 2 and 3
margins brands
Balance Sheet Analysis
Summary
Equity & Liabilities
Assets
Profit & Loss Account
Asset Equity Liability Comparison
Liquidity Ratios
Debt ratio
Revenue profit and Operating profit
Sale from different regions
Sale from Indian region
LIQUIDITY & CREDIT ANALYSIS
Current Ratio
Higher current ratio implies healthier short term liquidity comfort level. A current ratio below 1 indicates that the company
may not be able to meet its obligations in the short run. However, it is not always a matter of worry if this ratio temporarily
falls below 1 as many times companies squeeze out short term cash sources to achieve a capital intensive plan with a
longer term outlook. Apollos average current ratio over the last 5 financial years has been 1.23 times which indicates that
the Company is comfortably placed to pay for its short term obligations.
Long Term Debt to Equity Ratio
Companies operating with high long term debt to equity on their balance sheets are vulnerable to economic cycles. In times
of slowdown in economy, companies with high levels of debt find it increasingly difficult to service the interest on their
borrowings as profit margins decline. We believe that long term debt to equity ratio higher than 0.6 0.8 could affect the
business of a company and its results of operations.
Apollos average long term debt to equity ratio over the last 5 financial years has been 0.36 times which indicates that the
Company operates with low level of debt.
Interest Coverage ratio
Interest coverage ratio indicates the comfort with which the company may be able to service the interest expense (i.e.
finance charges) on its outstanding debt. Higher interest coverage ratio indicates that the company can easily meet the
interest expense pertaining to its debt obligations. In our view, interest coverage ratio of below 1.5 should raise doubts
about the companys ability to meet the expenses on its borrowings. Interest coverage ratio below 1 indicates that the
company is just not generating enough to service its debt obligations.
Apollos average interest coverage ratio over the last 5 financial years has been 6.23 times which indicates that the
Company can meet its debt obligations without any difficulty.
DIVIDEND HISTORY & OWNERSHIP
PATTERN
The Company has maintained an average dividend yield of0.66%over the last 5
financial years.
In its latest stock exchange filing dated 31 March 2016, Apollo reported a promoter
holding of 44.15 %. Large promoter holding indicates conviction and sincerity of the
promoters. We believe that a greater than 35 % promoter holding offers safety to
the retail investors.
At the same time, institutional holding in the Company stood at 42.63 % (FII+DII).
Large institutional holding indicates the confidence of seasoned investors. At the
same time, it can also lead to high volatility in the stock price as institutions buy
and sell larger stakes than retail participants.
CASH FLOW GRAPH
CASH FLOW STATEMENT
CASH FROM OPERATING ACTIVITIES:
Cash from operating activities have seen the increase by 88.41% from FY15 to FY16. The
amount of increase in the inflow through operating activities is quite huge.
CASH FROM INVESTING ACTIVITIES:
The amount of cash which have been invested in this year has been 3 times of what it
was in the previous year. The company in November 2016 decided to set up a
manufacturing plant with investment of 525 cr.
CASH FROM FINANCING ACTIVITIES:
Now financing activities takes into account the interest payments, loans taken,
dividends paid. This year the company has seen Cash-In which means the company
might have taken loans for its financing.
SHARE PRICE PERFORMANCE
HOW ARE WE AGAINST OUR PEERS.!!!
Market Trends Among the
competitors
COMPETITION
 HORIZONTAL ANALYSIS OF APOLLO TYRES
LTD. , MRF TYRES LTD & CEAT TYRES LTD.
Comparing the percentage change in ratios of current year with previous year for
Apollo tyres ltd and its competitors MRF tyres ltd. & CEAT tyres ltd.

Apollo tyres ltd. MRF tyres ltd. CEAT tyres ltd.

Revenue from operations -7.99% 54.01% -1.28%

Purchase of Stock in trade 3.20% -35.93% 20.4%

Finance cost -49.9% 48.31% -31.18%

 Apollo tyres ltd. MRF tyres ltd. CEAT tyres ltd.

Profit after tax 11.80% 160.48% 40.76%

Other Expenses 4.10% 64.56% 8.64%

Current Liabilities 35.98% 10.34% -21.30%

Current Assets 22.50% 12.60% -17.55%

Long Term Borrowing 82.53% 23.88% 66.44%

Fixed Assets 18.21% 39.47% 34.35%

DUPONT ANALYSIS

DuPont Financial Analysis Model is a rather straightforward method for assessing

the factors that influence a firms financial performance.
DUPONT SYSTEM WHAT IS IT?

The system identifies profitability as being impacted by three different levers:

1. Earnings & efficiency in earnings Earnings

2. Ability of your assets to be turned into profits Turnings
3. Financial leverage Leverage
DUPONT SYSTEM
Earnings/Efficiency
Profit Margin

Return On
Income X = Assets (less
Stream interest adj.)
Asset
Turnover Return On
X =
Equity
Turnings/Asset Use

Financial
Investment
Structure
Stream
Leverage
DUPONT ANALYSIS OF APOLLO TYRES LTD. & MRF TYRES LTD.

Apollo Tyres ltd MRF Tyres ltd.

ROE ROE
(17.68%) (34.25%)

Return on Financial Return on Financial

net assets Leverage net assets Leverage

Asset Asset
Profit Margin Profit Margin
Turnover (0.8587) Turnover (0.9514)
(13.16%) (17.64%)
(1.55) (2.03)
CORRELATION BETWEEN APOLLO TYRES
SHARES WITH OTHER COMPETITORS AND
NIFTY

Taken historical prices of Nifty, Apollo tyres, MRF tyres, JK tyres

Found the correlation between each.
Correlation : correlation values

Apollo tyres - Nifty 0.5202 (52.02%)

Apollo tyres MRF tyres 0.7317(73.17%)
Apollo tyres JK Tyres 0.7838(78.38%)
APOLLO TYRES VS J.K. TYRES

Earning Per Share

Rs. 21.50 Rs. 14.50

Dividend Per Share

Rs. 2.00 Rs. 1.5

OUTLOOK OF STOCK

As per Bloomberg source and independent Research houses, 65% predict the BUY
option and 25% on HOLD

Company Name Rating Impact on

Company
Apollo tyres ltd. BUY POSITIVE

*At your
risk
Thank you