Apollo Tyres stock drops 15% in 10 sessions, hits 8-week low: Are we in a downtrend?

Tyre companies faced challenges in the June quarter, with Apollo Tyres missing street estimates. Factors such as commodity headwinds and a loss in market share in the truck segment contributed to a weak performance.

Following the disappointing results announcement on August 8, Apollo Tyres’ stock plunged by almost 7%, correcting 15% from its recent peak of ₹568 per share on July 30. The stock has dropped by 13% this month, marking its worst performance since June 2022 and is currently trading at an 8-week low.

Analysts are forecasting further downside for the company based on its June quarter numbers. Elara Capital downgraded the stock to ‘Sell’ with a revised target price of ₹442 per share.

Other brokerages like Kotak Institutional Equities and Nomura have also adjusted their target prices for Apollo Tyres, indicating a bearish outlook on the stock.

Navigating through challenges

Apollo Tyres’ consolidated revenue saw a marginal increase in the first quarter, but faced challenges in the EU market. The company’s EBIT margin also declined, reflecting the tough quarter it experienced.

On a standalone basis, Apollo Tyres’ revenue growth lagged behind its competitors like CEAT and MRF, as it focused on profitability over market share. This strategy led to a drop in EBITDA margin on a quarterly basis.

Despite the challenges, Apollo Tyres remains optimistic about its future prospects and aims to balance profitability with market share growth, especially amidst volatile raw material prices.

Analysts caution that Apollo Tyres may face hurdles in margin recovery due to aggressive pricing strategies in the industry. The company will need to carefully navigate through the current market dynamics to regain its position.

Market experts foresee a challenging road ahead for Apollo Tyres as it strives to strike a balance between profitability and market share recovery amidst market uncertainties.

Insights from Kotak

Kotak Institutional Equities highlights the dual challenges faced by Apollo Tyres in balancing market share recovery and profitability. The company’s strategy moving forward will be closely monitored by investors.

With a volatile market environment and increasing commodity prices, Apollo Tyres must tread carefully to secure its position in the industry and meet investor expectations.

Please note: The opinions and recommendations expressed in this article are solely those of individual analysts and should not be considered as endorsed by PrimePress. It is advisable to consult with financial experts before making any investment decisions.