Apollo Tyres Share Price Target at Rs 555: ICICI Securities
ICICI Securities has reaffirmed its BUY recommendation on Apollo Tyres Ltd., raising the 12-month target price to Rs 555 (from Rs 520), representing a 16% upside from the current market price of Rs 480. This strategic revision is underpinned by improving margin visibility, product realignment, and operational recalibration both in India and overseas. Despite near-term profitability pressures, Apollo is actively addressing portfolio gaps, scaling capacities, and executing cost discipline—placing it in a favourable trajectory to outpace its peers in FY26 and beyond.
Q4FY25: Topline Growth, But Margin Contraction Weighs
In its Q4FY25 results, Apollo Tyres posted standalone revenues of Rs 45,805 million, marking a 4.4% YoY increase. On a consolidated basis, revenue stood at Rs 64,236 million, up 2.6% YoY. However, operating margins came under stress:
Standalone EBITDA margin fell to 11.2%, a drop of 440 basis points YoY.
Consolidated EBITDA margin slipped to 13.0%, down 340 basis points YoY.
The margin pressure was largely attributable to elevated input costs and higher other expenses. Despite revenue growth, adjusted consolidated PAT declined 22.4% YoY to Rs 3,032 million, reflecting cost-side headwinds.
Domestic Outlook: Realignment Sets the Stage for OE Comeback
Apollo’s Indian business faced volume stagnation during the quarter, with flattish YoY growth. Key trends included:
Replacement demand remained strong across both Truck & Bus Radial (TBR) and Passenger Car Radial (PCR) segments.
The Original Equipment (OE) segment was subdued due to a strategic portfolio revamp focused on larger rim-size tyres.
To counter these challenges, Apollo has taken corrective actions:
Expanded SKU portfolio in OE segment for both PV and T&B categories.
Strengthened personnel hiring to improve product development and sales coordination.
Management expects a sharp recovery in OE volumes beginning FY26**, along with continued momentum in the replacement segment.
European and Global Operations: Volume Set to Rebound
Apollo’s performance in Europe lagged due to capacity limitations at its Hungary plant, impacting Q4 numbers. The company has won new business from leading German OEMs, which will come online once new capacity is operational:
Capex in Hungary and Andhra Pradesh plants will add 4,000 tyres/day capacity.
The Dutch plant, which produces 500k tyres/year, is under a phased closure plan, with volumes to be shifted to Hungary.
Management emphasized that US exposure is minimal (~3% of consolidated revenue), mitigating any fallout from potential US import tariffs.
Cost Tailwinds: Commodity Cooling to Aid Margins
A key driver of optimism is the decline in global natural rubber and crude prices, easing raw material costs. Apollo also benefits from:
Higher operational leverage from capacity utilisation.
Premiumisation in product mix—especially in PCR and high-performance tyres.
The company has guided for a stable raw material cost basket in Q1FY26, providing tailwinds for EBITDA margin expansion in coming quarters.
Capex and Capital Efficiency: Disciplined Allocation Continues
Apollo Tyres plans a Rs 15 billion capital expenditure in FY26, focusing on:
Capacity augmentation at Hungary and Andhra Pradesh.
Maintenance and efficiency improvements across domestic and international facilities.
The balance sheet remains strong:
| Metric | FY25 | FY26E | FY27E |
|---|---|---|---|
| Net Debt/Equity (x) | 0.2 | 0.1 | 0.0 |
| RoE (%) | 9.0 | 11.7 | 13.2 |
| RoCE (%) | 8.6 | 10.7 | 12.5 |
| EV/EBITDA (x) | 9.5 | 7.6 | 6.4 |
Earnings Revisions and Valuation Uplift
ICICI Securities has revised upward its FY26 and FY27 estimates:
| Metric | FY26E Old | FY26E New | FY27E Old | FY27E New |
|---|---|---|---|---|
| Revenue (Rs mn) | 274,300 | 283,000 | 289,900 | 301,300 |
| EBITDA (Rs mn) | 41,100 | 42,000 | 45,200 | 46,910 |
| EPS (Rs) | 27.0 | 28.0 | 34.0 | 36.0 |
The target valuation of 15x FY27E EPS implies a fair value of Rs 555 per share, reflecting a growth-led re-rating potential.
Stock Levels and Investment Recommendation
At the current price of Rs 480, Apollo Tyres presents a 16% upside opportunity. Key technical levels:
Immediate Support: Rs 465
Resistance Band: Rs 510–530
12-Month Target: Rs 555
Investors with a medium- to long-term horizon can consider accumulating at current levels, especially given the earnings recovery visibility and sectoral tailwinds.
Risks to Monitor
Raw Material Inflation: Any sharp reversal in rubber or crude prices could compress margins.
Competitive Intensity: Aggressive pricing or volume push from rivals may pressure market share.
Execution Delay: Capex slippages or Dutch plant restructuring issues could impact overseas growth plans.
Final Take: Positioned for a Strong Comeback
Apollo Tyres is recalibrating from a muted FY25 into a structurally stronger position, thanks to product portfolio correction, strategic capacity additions, and global diversification. While short-term margin volatility persists, the underlying business momentum, particularly in OE and replacement demand, is strengthening.
With earnings upgrades, operational tailwinds, and a clear growth strategy, Apollo is now a stock with re-rating potential. For investors seeking value in the auto ancillary space, Apollo Tyres is beginning to look like a high-performance bet.
