Nomura retained its ‘Neutral’ rating on Apollo Tyres and raised the target price to Rs 468 from Rs 452 after the tyre maker reported June quarter EBITDA that matched consensus estimates and was ahead of Nomura’s expectations.
Apollo Tyres’ revenue for Q1FY27 was about Rs 73.9 billion, up roughly 13% year‑on‑year. EBITDA stood at Rs 8.7 billion, which was flat year‑on‑year, and the EBITDA margin was 11.7%, beating Nomura’s estimate of 10.5%.
The brokerage notes that Apollo Tyres is heavily exposed to the CV segment, which accounts for about 55% of FY26 standalone revenue, a segment where industry growth is slow. It also points out rising competition in the replacement segment from new entrant BIL IN.
Raw material costs rose about 17% quarter‑on‑quarter in Q1 and could increase another 8% in Q2. Apollo Tyres has already lifted prices across categories, but further hikes may be required to offset the cost pressure.
Nomura says the total price increase needed is 15%, with a 9% rise in TBR and an 11% rise in other categories until July.
High capital expenditure is expected to drag on free cash flow. Nomura flagged Rs 35 billion for FY27 and Rs 30 billion for FY28, and lower operating profit that could keep free cash flow subdued, with a negative FCF of –Rs 4.7 billion in FY27 and Rs 7 billion in FY28.
The brokerage expects the new plant in Hungary to start in the second half of FY27 and the new India plant to begin in the fourth quarter of FY27.
Nomura revised its EBITDA margin estimates to 12.4% for FY27 and 13.5% for FY28, down from 12.8% and 13.3% respectively. This led to a 6% cut in the FY27 estimate and a 3% increase in the FY28 EPS estimate.
It maintains a target EV/EBITDA of 6.5× and rolls forward the valuation to September‑27F to arrive at the higher target price of Rs 468.
Nomura believes Apollo Tyres’ current valuation is in the fair‑value zone and prefers Ceat over Apollo Tyres in the sector.