Apollo Tyres Share Price Target at Rs 548: Geojit Investments Research Report
Geojit Investments has upgraded Apollo Tyres Limited to an ACCUMULATE rating, establishing a 12-month price target of Rs. 548, representing an anticipated upside of 11% from the current market price of Rs. 494. The tyre manufacturer's second-quarter performance showcased resilience through GST reforms and strategic premiumisation initiatives, despite navigating challenging European operations. The company's consolidated revenue climbed 6.1% year-over-year to Rs. 6,831 crore in Q2FY26, driven predominantly by robust domestic operations and margin expansion across its Indian business. With the anticipated closure of its Enschede facility in the Netherlands by June 2026 and stabilizing raw material costs, Apollo Tyres appears positioned for accelerated profitability improvement, warranting investor attention in the auto components sector.
Geojit's Investment Thesis and Rating Rationale
Geojit Investments has revised its stance on Apollo Tyres, elevating the recommendation from HOLD to ACCUMULATE, with a revised target price of Rs. 548 based on 17 times FY27E adjusted earnings per share. The brokerage house identifies multiple catalysts supporting this optimistic outlook, including accelerating demand recovery, operational excellence initiatives, and strategic restructuring of European operations. The company trades at a current market capitalization of Rs. 31,457 crore, with a 52-week trading range spanning Rs. 368 to Rs. 540.
Operational Performance Demonstrates Geographic Divergence
Apollo Tyres' second-quarter consolidated revenue reached Rs. 6,831 crore, reflecting a 6.1% year-over-year expansion primarily attributable to the company's Indian operations. The domestic business generated Rs. 4,715 crore in revenue, advancing 5.7% annually through goods and services tax reforms and volumetric growth across replacement and original equipment manufacturer segments. European operations contributed Rs. 1,848 crore, posting a 3.8% increase despite persistent geopolitical turbulence and macroeconomic uncertainties. EBITDA margin from Indian operations surged 321 basis points year-over-year to 15.3%, while European margins contracted 213 basis points to 12.7% during Q2FY26.
Margin Expansion Fueled by Strategic Initiatives
The company achieved consolidated EBITDA of Rs. 1,021 crore in the second quarter, representing a robust 16.3% year-over-year increase, with margins expanding 130 basis points to 14.9%. This profitability enhancement stemmed from enhanced topline performance and diminished raw material expenditures, which declined 3% sequentially and are projected to remain stable or marginally softer in Q3FY26. However, reported profit after tax declined 13.2% year-over-year to Rs. 258 crore due to a Rs. 180 crore exceptional charge related to the Enschede plant closure. Adjusted PAT demonstrated remarkable resilience, surging 44.8% to Rs. 438 crore, with adjusted EPS climbing from Rs. 4.8 to Rs. 6.9.
Premiumisation Strategy Accelerates Product Mix Transformation
Apollo Tyres continues advancing its product premiumisation agenda alongside a dual-brand strategy in passenger car radials that continues delivering tangible benefits. The ultra-high performance tyre mix reached 49% in Q2FY26, expanding from 46% in the corresponding prior-year quarter. With passenger car radial capacity expansion in Hungary progressing on schedule, management anticipates accelerating demand momentum. Overall domestic volumes expanded 4%, predominantly driven by farm equipment, two-wheelers, and three-wheelers, while truck and passenger car segments exhibited muted growth trajectories.
Financial Projections and Valuation Metrics
| Financial Parameters (Rs. Cr) | FY25A | FY26E | FY27E |
|---|---|---|---|
| Sales | 26,123 | 28,057 | 30,021 |
| Growth (%) | 2.9 | 7.4 | 7.0 |
| EBITDA | 3,572 | 4,006 | 4,713 |
| EBITDA Margin (%) | 13.7 | 14.3 | 15.7 |
| Adjusted PAT | 1,290 | 1,735 | 2,107 |
| PAT Growth (%) | -28.3 | 34.5 | 21.5 |
| Adjusted EPS (Rs.) | 20.3 | 27.3 | 33.2 |
| P/E Ratio | 21.0 | 19.0 | 15.7 |
Geojit projects consolidated sales of Rs. 28,057 crore for FY26E and Rs. 30,021 crore for FY27E, representing growth rates of 7.4% and 7.0% respectively. Adjusted profit after tax is forecast to surge 34.5% to Rs. 1,735 crore in FY26E, followed by 21.5% growth to Rs. 2,107 crore in FY27E. The stock currently trades at 15.7 times FY27E estimated earnings, with return on equity projected to improve from 7.6% in FY26E to 12.3% in FY27E.
European Restructuring to Enhance Profitability
Management anticipates completing the Enschede manufacturing facility shutdown in the Netherlands by June 2026, having incurred an exceptional cost of EUR 17 million during Q2FY26. This strategic closure is expected to generate positive ramifications for European operations' profitability going forward. The company maintains optimism regarding sustaining and accelerating topline growth momentum across both Indian and European markets.
Key Investment Levels and Recommendations
Current Market Price: Rs. 494
Target Price: Rs. 548
Upside Potential: 11%
Investment Horizon: 12 months
Rating: ACCUMULATE
52-Week High: Rs. 540
52-Week Low: Rs. 368
Support Level: Rs. 368 (52-week low serves as critical support)
Resistance Level: Rs. 540 (previous peak represents immediate resistance)
The brokerage maintains a constructive stance based on anticipated domestic demand uptick, particularly in replacement demand across segments, alongside expectations of improved operating performance supported by demand recovery and ongoing cost optimization efforts. The raw material situation remains stable without expectations of further deterioration, providing additional margin protection.
