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UBS upgrades Apollo Tyres to 'Buy', sees 34% upside on earnings recovery
UBS has upgraded Apollo Tyres to 'Buy' from 'Neutral' and raised its target price to Rs 590, implying a 34% upside. The brokerage cites improving prospects in India and Europe, while cautioning on near-term rubber cost pressures. The stock jumped as much as 6.4% on Monday.
By Tertius News AI Desk1 outlet · 1 distinct · 1 articleVersion 1Coverage Published
Shares of Apollo Tyres climbed on Monday after UBS upgraded the stock to 'Buy' from 'Neutral' and raised its target price to Rs 590 from Rs 580, implying a potential upside of around 34% from Friday's closing price. The stock jumped as much as 6.4% to a day's high of Rs 468 on the BSE, as per The Economic Times.
UBS's rationale
UBS noted that Apollo Tyres continues to trade at a valuation discount to its peers and has underperformed the broader tyre sector over the past four years. The brokerage sees an improving outlook, with management taking concrete steps to strengthen the India business, including investments in brand building such as the sponsorship of the Indian cricket team's jersey. Prospects for the Europe business are also becoming more constructive, UBS said.
The brokerage believes investors remain overly focused on near-term commodity cost pressures and recent execution challenges, while overlooking the company's significant earnings recovery potential once commodity pressures ease. UBS expects the market is underappreciating Apollo Tyres' medium-term earnings recovery potential.
Near-term pressures, longer-term recovery
While UBS acknowledged that the June quarter saw a 22% quarter-on-quarter rise in natural rubber prices, it cautioned that the September quarter could face further pressure. However, the brokerage expects earnings to improve meaningfully thereafter, projecting project EBITDA to rise 21% year-on-year in FY28.
Q1 results
Apollo Tyres reported a consolidated net profit of Rs 348.9 crore for the June quarter, compared with Rs 12.9 crore in the same period last year. Revenue from operations increased 12.8% year-on-year to Rs 7,397.8 crore. EBITDA was broadly unchanged at Rs 868 crore, with operating margin falling to 11.7% from 13.2% a year earlier.
The bottom line was aided by an exceptional gain of Rs 24 crore during the quarter, against an exceptional loss of Rs 370 crore in the year-ago period.
How this outlet told it
A framing line is our reading of that outlet's own text — an interpretation, not a quotation and not a fact we assert. Check it against what the outlet published.
The Economic Times
Framing:Our reading Optimistic/analytical — 'better,' 'concrete steps,' 'meaningful improvement,' 'underappreciating' all convey a positive, forward-looking stance.
Facts Included:
Apollo Tyres shares jumped as much as 6.4% to day's high of Rs 468 on BSE
UBS upgraded stock to Buy from Neutral and raised target price to Rs 590 (34% upside) from Rs 580
UBS notes Apollo Tyres trades at valuation discount to peers and underperformed sector over past four years
UBS cites improving outlook, including Indian cricket team jersey sponsorship as brand-building investment
UBS believes investors overly focused on near-term commodity cost pressures and execution challenges, overlooking earnings recovery potential
Natural rubber prices rose 22% QoQ in Q1 FY27; Q2 FY27E could face pressure
UBS expects project EBITDA rising 21% YoY in FY28
Q1 results: consolidated net profit Rs 348.9 crore vs Rs 12.9 crore year earlier
Revenue from operations up 12.8% YoY to Rs 7,397.8 crore
EBITDA broadly unchanged at Rs 868 crore; operating margin fell to 11.7% from 13.2%
Exceptional gain of Rs 24 crore vs exceptional loss of Rs 370 crore year ago
AI-extracted; can misattribute a claim — see Methodology.
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Claim
Confidence
Status
ClaimUBS upgraded Apollo Tyres stock to 'Buy' from 'Neutral' and raised its target price to Rs 590 from Rs 580.
ClaimUBS believes the outlook for Apollo Tyres is improving as management takes concrete steps to strengthen the India business, including investments in brand building such as the sponsorship of the Indian cricket team's jersey.
ClaimApollo Tyres reported consolidated net profit of Rs 348.9 crore for the June quarter, compared with Rs 12.9 crore in the corresponding quarter last year.
ClaimApollo Tyres reported an exceptional gain of Rs 24 crore during the quarter, compared with an exceptional loss of Rs 370 crore in the year-ago period.