Research report_Apollo Tyres Ltd_ 05122012 - Karvy

Apollo Tyres Limited
Why
Investment rationale
Global presence: Apollo Tyres Ltd (Apollo) operates through seven manufacturing
facilities and a wide distribution network spread across India, Africa and Europe. In
FY12, its Indian operations contributed 66% of the revenues, European operations
23% and African operations 11%. It sells its products in 118 countries across the
world. Apollo Vredestein – its European arm is agile enough to distribute its products
within 90% of Europe in 24 hours.
Capacity expansions: Apollo is going ahead with significant capacity additions to
meet the future demand – Chennai plant from 200 MT per day to 500 MT per day,
Netherlands plant to 7.5 million tyres per annum from 5.5 million tyres annum,
installation of a component preparation unit in South Africa to expand its commercial
vehicle capacity at Durban by 20%, the Ladysmith passenger vehicle and light truck
tyre capacity by 30% and also conversion of truck-bus cross ply facility in Kerala
plant to an industrial and specialty tyres/OHT facility. It also has plans to set up green
field plants in South East Asia and Europe in the coming five years.
Replacement demand vs. OEM Demand: On a consolidated basis, the company
earns its revenues mostly from the replacement market. The ratio of Original
Equipment Manufacturers (OEM) to replacement was 27% and 73% respectively in
FY12. The OEM demand is currently subdued. However, the replacement market
with a steady growth rate is likely to offset the negative impact.
Beneficiary of radialisation in TBR segment: Radialisation has been nearly
achieved for passenger vehicle segment. However, it is relatively very low in the
commercial vehicle segment. Radial trends are expected to be at the forefront of
revenues for tyre manufacturing companies. Apollo, being the market leader in the
commercial vehicles segment and having the largest radial tyre capacity in India
(FY12) is expected to benefit from this trend and it has ramped up its Chennai plant
to meet the increasing demand in Truck and Bus Radials (TBR) segment.
Strong brand portfolio: Apollo has a comprehensive portfolio comprising six
brands-Apollo, Vredestein, Dunlop, Regal, Kaizen and Maloya. Vredestein
commands a premium position in ultra-high performance (UHP) and winter segments
of passenger vehicle tyres in Europe. Dunlop is sold in 32 African countries.
Fall in natural rubber prices: Tyre industry is highly sensitive to changes in natural
rubber prices that have fluctuated widely in FY12, ranging between Rs230/kg in April
2011 to Rs190/kg in March 2012. However, the prices have shown a declining trend
and stabilized in the first half of FY13. This is expected to benefit Apollo.
Emerging market leader with diversified product profile: Apollo is ranked 15 th
among the top global tyre manufacturers. The company has a diversified product
profile ranging from tyres for trucks/buses and light commercial vehicles (LCV) to
passenger vehicles and off-highway vehicles. It’s the market leader in the truck/bus
and LCV segments commanding a market share of nearly 27% and third in
passenger car segment with a market share of nearly 17% in India.
Valuations & outlook
Research Desk – Retail Broking
Page 1
Rating Target Time frame
BUY Rs 120 12 months
Date December 05, 2012
Market data
CMP (Rs) 84.55*
Market Cap (Rs cr) 4261.53
Face value (Rs) 1.00
NSE symbol APOLLOTYRE
52 week H/L (Rs) 102.45/54.25
EPS (Rs) 8.13
P/E 10.40
Book value (Rs) 56.20
Div yield (%) 0.59
Avg. daily trading vol. (3m) 3908369
Avg. daily trading val. (cr) 34.72
* Close price as on December 4, 2012
Shareholding (as on 09/30/2012)
Promoter 43.37%
FIIs 22.30%
DIIs 11.23%
Public 23.10%
Price relative to CNX Auto
1.20
1.00
0.80
0.60
0.40
0.20
0.00
-0.20
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Price movement
Apollo CNX Auto
Month Oct-12 Nov-11 Nov-10 Nov-08
Price 85.80 65.63 65.25 20.27
B. Vinay Kanth Raj
vinaykanthraj.b@karvy.com
Off: +91 40 44857919
Mob: +91 8008460204
Apollo, with its capacity expansions in Chennai, South Africa (Durban & Ladysmith) and Netherland facilities coupled with proposed
Greenfield project investments in South-East Asia & Europe is well positioned to further strengthen its leadership position in the trucks and
LCV segments. Its diversified product portfolio backed by the strong global presence with proximity to growth and profit pool markets makes
it a VALUE BUY from medium- and long-term perspective. At CMP Rs 84.55, the stock is trading at a valuation of 0.48x FY13E and
0.46x FY14E EV/Sales. We recommend a BUY with a target of Rs 120, representing 0.59x FY14E EV/Sales.

QIP Issue & its impact on financial estimates
Page 2
Apollo Tyres Ltd
The company, in its Board of Directors meeting held on 1 st October, 2012, considered and approved, the qualified
institutions placement to QIBs up to US$ 150 million or Rs 800 crore, subject to the approval of shareholders to be sought
through postal ballot u/s 192 (A) of the Companies Act, 1956. Subsequently, on 6 th November, 2012, the company’s
shareholders have passed a special resolution giving their consent to the board to create, offer, issue and allot, at its
absolute discretion, equity shares for cash for an aggregate amount not exceeding US$150 million (equivalent to approx.
Rs 800 crore), to be listed on one or more stock exchanges in India, in one or more tranches, with or without an overallotment
option to QIBs. The allotment of the equity shares to QIBs pursuant to this resolution shall be completed within
12 months of the date of approval by shareholders.
Considering, the size of issue and keeping the time limits in view, we have drawn two sets of financials giving an effect to
equity issue to QIBs. Taking the further formalities into account, such as seeking approval from stock exchanges for listing
of shares, issue of draft/final offer document and other pre & post issue formalities, we presumed that the issue would
impact FY14 financials.
Scenario 1 – Without QIP
Presuming that the company does not raise an amount of USD150 million (equivalent to approx. Rs 800 crore) through
the QIP issue, we have drawn the financials for FY14 in an usual trend extending the financial position as on FY13 to the
subsequent period with general adjustments with the operations of the company.
Scenario 2 – With proposed QIP
Presuming that the company decides to raise the amount of USD150 million (equivalent to approx. Rs 800 crore) via the
QIP issue in FY14, based on the information available, together with the internal accruals, the funds raised would be
utilized for the following expansions, over a period of five years:
Setting up a Greenfield plant in South East Asia in Thailand or Indonesia in two phases.
o The initial capacity of the plant will be 16,000 units of passenger car radials (PCRs) per day and 1,500
units of truck and bus radials a day (TBRs) and subsequently would be increased to a capacity of
24,000 units of PCRs per day and 3,000 units of TBRs a day in the second phase.
o Phase I would require an investment of around USD 250-300 million (equivalent to approx. Rs1375 to
Rs1650 crore) and Phase II an investment of USD 200 million (equivalent to approx. Rs1100 crore).
o This plant would cater mainly to the ASEAN (Association of South-East Asian Nations) countries and
20% of the production would be exported to Europe and Latin America.
Setting up a Greenfield plant in Eastern Europe with an investment of around USD350 million (equivalent to
approx Rs1925 crore) for production of passenger car radials (PCRs) with a capacity of 7 million units per
annum.
Conversion of Kalamassery plant in Kerala from truck & bus tyres to off-highway tyres (OHTs) with an investment
of around Rs200 crores to cater to export markets, like USA, Europe, Australia and Latin America (85% of
production) and balance 15% production to Indian markets.
Capacity expansion in Netherlands plant (Vredestein) to 7.5 million units per annum from the current 6 million
units per annum with an investment of around Euro 50 million or Rs355 crore.
Revenue estimates for FY14
In our estimates for FY14, we have made additions to revenue on the expectation that the benefits of capacity expansion
in Netherland plant would be fully realized from the last quarter of FY14. And, coming to the South East Asian and
European expansions, which are in the nature of Greenfield projects, revenue inflows are expected to flow-in only in the
subsequent periods.

Scenario 1
Financial estimates (Without QIP)
Page 3
Apollo Tyres Ltd
Profit and loss account (Rs cr)
Particulars FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E
Net sales 4,691.24 4,984.07 8,120.74 8,867.72 12,153.29 13954.93 15513.51
Stock in trade & WIP 70.63 11.37 -218.06 473.71 255.75 275.50 328.50
Total income 4,761.87 4,995.44 7,902.68 9,341.43 12,409.04 14,230.43 15,842.01
Consumption of raw materials 2,819.26 3,228.54 3,933.98 5,314.82 7,635.15 8554.37 9509.78
Other expenditure 733.15 752.59 1,276.60 1,446.32 1,615.18 1953.69 2148.62
Employees cost 440.56 415.03 1,088.47 1,134.12 1,335.01 1535.04 1737.51
Purchase of traded goods 176.50 183.13 428.75 481.04 657.61 753.57 837.73
Total expenditure 4,169.47 4,579.29 6,727.80 8,376.30 11,242.94 12,796.67 14,233.64
EBITDA 592.40 416.15 1,174.88 965.13 1,166.10 1,433.76 1,608.36
Depreciation 129.86 128.51 254.23 271.94 325.60 341.16 391.86
EBIT 462.54 287.64 920.65 693.19 840.50 1,092.60 1,216.50
Interest 78.45 97.25 115.38 196.96 287.29 279.64 258.83
EBT excl. other income &
exceptional items
384.09 190.38 805.27 496.23 553.21 812.96 957.67
Other income 21.19 23.01 21.37 50.90 32.64 34.89 38.78
EBT incl. other income 405.27 213.39 826.64 547.13 585.85 847.85 996.46
Exceptional items 0.00 0.00 87.37 0.00 -29.38 0.00 0.00
PBT 405.27 213.39 914.02 547.13 556.47 847.85 996.46
Tax 135.59 74.23 260.66 106.33 144.35 237.40 279.01
PAT 269.69 139.15 653.35 440.80 412.12 610.45 717.45
Share of loss of associates 0.00 0.01 0.00 -0.64 -2.31 -2.66 -2.95
Minority interest 0.00 0.00 0.00 0.00 -0.09 -0.07 -0.06
Net profit 269.69 139.16 653.35 440.16 409.90 607.87 714.55
No. of shares 47.1 50.4 50.4 50.4 50.4 50.4 50.4
EPS 5.73 2.76 12.96 8.73 8.13 12.06 14.18
The CAGR shown in last 5 years and the expectations for forthcoming periods (.i.e., from FY12 to FY14E)
Particulars Over a period of 5 years (FY08-FY12) FY12-FY14E (without QIP)
Sales 26.87% 12.98%
EBITDA 18.45% 17.44%
EBIT 16.10% 20.30%
NP 11.03% 32.03%
EPS 9.16% 32.03%

Page 4
Apollo Tyres Ltd
Balance sheet (Rs cr)
Particulars FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E
Equity & Liabilities
Share capital 48.85 50.41 50.41 50.41 50.41 50.41 50.41
Share warrant 4.57 0.00 0.00 0.00 0.00 0.00 0.00
Reserves and surplus 1129.07 1299.23 1917.42 2362.12 2782.36 3360.84 4031.31
Proceeds of equity issue to QIBs 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Shareholders' funds total 1182.48 1349.64 1967.82 2412.53 2832.77 3411.25 4081.72
Minority interest 0.00 0.00 0.00 0.85 0.76 0.69 0.63
Non-current liabilities
Long-term borrowings 259.59 526.32 1339.15 1228.10 1615.78 1408.64 1034.83
Deferred tax liabilities 175.57 194.15 251.44 319.50 405.05 396.95 400.92
Other long-term liabilities 0.00 0.00 0.00 20.60 45.41 47.68 50.06
Long-term provisions 38.56 38.87 66.47 107.41 93.91 95.78 97.70
Total 473.71 759.35 1657.06 1675.60 2160.15 1949.06 1583.52
Current liabilities
Short-term borrowings 386.53 364.41 368.00 993.76 933.90 980.60 1029.63
Trade payables 685.48 571.48 1299.11 1199.78 1293.47 1396.95 1466.80
Other current liabilities 6.90 14.57 13.11 444.72 442.19 464.30 487.51
Current maturities of LT debt 0.00 0.00 0.00 258.36 322.33 407.14 523.81
Short-term provisions 72.59 75.23 167.22 323.75 408.94 417.12 425.46
Total 1151.51 1025.68 1847.44 3220.37 3400.84 3666.11 3933.21
Total equities and liabilities 2807.70 3134.66 5472.33 7309.34 8394.52 9027.11 9599.08
Assets
Non-current assets
Fixed assets 1205.14 1401.87 2442.52 3394.29 4023.83 4207.66 4340.80
Capital work-in-progress 94.95 281.41 536.04 357.78 330.55 356.99 385.55
Goodwill 21.50 23.51 117.52 124.97 133.77 140.46 147.48
Non-current investments 5.04 4.60 5.69 11.18 15.82 18.20 20.92
Deferred tax assets (Net) 0.00 0.00 0.00 3.30 2.51 2.63 2.77
Long-term loans & advances 0.00 0.00 0.00 263.65 220.67 231.70 243.29
Total 1326.62 1711.39 3101.77 4155.16 4727.14 4957.64 5140.80
Current assets
Inventories 715.15 630.22 992.87 1753.75 1999.11 2119.05 2436.91
Trade receivables 312.90 224.74 786.90 951.66 1145.80 1203.09 1383.56
Cash & Cash equivalents 284.71 362.09 348.98 190.89 173.04 380.42 252.56
Short term loans & advances 167.88 205.39 237.22 257.88 334.15 350.85 368.39
Other current assets 0.45 0.83 4.58 0.00 15.29 16.06 16.86
Total 1481.08 1423.27 2370.55 3154.19 3667.38 4069.47 4458.28
Assets total 2807.70 3134.66 5472.33 7309.34 8394.52 9027.11 9599.08

Ratios
EPS has shown a CAGR of 20.46% over a period of 5 years .i.e., from FY08 to FY12.
Page 5
Apollo Tyres Ltd
Particulars FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E
Market data
EPS (Rs) 5.73 2.76 12.96 8.73 8.13 12.06 14.18
Cash per share (Rs) 5.83 7.18 6.92 3.79 3.43 7.55 5.01
Book value (Rs) 24.21 26.78 39.04 47.87 56.20 67.68 80.98
Margins
EBITDA margins (%) 12.63 8.35 14.47 10.88 9.59 10.27 10.37
EBIT margins (%) 9.86 5.77 11.34 7.82 6.92 7.83 7.84
Net profit margins (%) 5.75 2.79 8.05 4.96 3.37 4.36 4.61
Valuations
P/E (x) 7.60 7.73 5.44 8.08 10.05 8.65 8.89
EV/Sales (x) 0.53 0.32 0.60 0.66 0.56 0.55 0.56
EV/EBITDA (x) 4.20 3.86 4.18 6.06 5.85 5.35 5.40
P/BV (x) 1.80 0.80 1.81 1.47 1.45 1.54 1.56
Dividend yield (%) 1.15 2.11 1.06 0.71 0.61 0.48 0.60
Return Ratio
ROE (%) 22.81 10.31 33.20 18.24 14.47 17.82 17.51
ROA (%) 16.47 9.18 16.82 9.48 10.01 12.10 12.67
ROCE (%) 25.29 12.84 25.05 14.17 14.73 17.60 18.24
Leverage ratio
Debt/equity ratio (x) 0.55 0.66 0.87 1.03 1.01 0.82 0.63
Debt / Total assets (x) 0.23 0.28 0.31 0.34 0.34 0.31 0.27
Interest coverage ratio 5.90 2.96 7.98 3.52 2.93 3.91 4.70
Liquidity ratios
Current ratio (x) 1.29 1.39 1.28 0.98 1.08 1.11 1.13
Quick ratio (x) 0.52 0.57 0.61 0.35 0.39 0.43 0.42
EBITDA margins have fallen in FY11 and FY12 due to fluctuation in the prices of inputs, which constitute nearly
70 percent of the total cost.
Debt/equity ratio is likely to improve as we see an increase in repayments as compared to the expected fresh
borrowings to be made.
Interest coverage ratio is expected to improve due to lower debt burden and consequently, lower finance costs.

Scenario 2
Financial estimates (With proposed QIP)
Page 6
Apollo Tyres Ltd
Profit and loss account (Rs cr)
Particulars FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E
Net sales 4,691.24 4,984.07 8,120.74 8,867.72 12,153.29 13954.93 15718.25
Stock in trade & WIP 70.63 11.37 -218.06 473.71 255.75 275.50 334.50
Total income 4,761.87 4,995.44 7,902.68 9,341.43 12,409.04 14,230.43 16,052.75
Consumption of raw materials 2,819.26 3,228.54 3,933.98 5,314.82 7,635.15 8554.37 9635.29
Other expenditure 733.15 752.59 1,276.60 1,446.32 1,615.18 1953.69 2176.98
Employees cost 440.56 415.03 1,088.47 1,134.12 1,335.01 1535.04 1760.44
Purchase of traded goods 176.50 183.13 428.75 481.04 657.61 753.57 848.79
Total expenditure 4,169.47 4,579.29 6,727.80 8,376.30 11,242.94 12,796.67 14,421.50
EBITDA 592.40 416.15 1,174.88 965.13 1,166.10 1,433.76 1,631.26
Depreciation 129.86 128.51 254.23 271.94 325.60 341.16 408.42
EBIT 462.54 287.64 920.65 693.19 840.50 1,092.60 1,222.83
Interest 78.45 97.25 115.38 196.96 287.29 279.64 259.34
EBT excl. other income &
exceptional items
384.09 190.38 805.27 496.23 553.21 812.96 963.49
Other income 21.19 23.01 21.37 50.90 32.64 34.89 38.78
EBT incl. other income 405.27 213.39 826.64 547.13 585.85 847.85 1,002.27
Exceptional items 0.00 0.00 87.37 0.00 -29.38 0.00 0.00
PBT 405.27 213.39 914.02 547.13 556.47 847.85 1002.27
Tax 135.59 74.23 260.66 106.33 144.35 237.40 280.64
PAT 269.69 139.15 653.35 440.80 412.12 610.45 721.64
Share of loss of associates 0.00 0.01 0.00 -0.64 -2.31 -2.66 -2.95
Minority interest 0.00 0.00 0.00 0.00 -0.09 -0.07 -0.06
Net profit 269.69 139.16 653.35 440.16 409.90 607.87 718.74
No. of shares 47.1 50.4 50.4 50.4 50.4 50.4 58.0
EPS 5.73 2.76 12.96 8.73 8.13 12.06 12.39
The company is expected to show a CAGR of
Sales - 13.72%
EBITDA - 18.27%
EBIT - 20.62%
NP - 32.42%
EPS - 23.42%
over a period of next two-years, considering the revenues from QIP investments

Page 7
Apollo Tyres Ltd
Balance sheet (Rs cr)
Particulars FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E
Equity & Liabilities
Share capital 48.85 50.41 50.41 50.41 50.41 50.41 50.41
Share warrant 4.57 0.00 0.00 0.00 0.00 0.00 0.00
Reserves and surplus 1129.07 1299.23 1917.42 2362.12 2782.36 3360.84 4028.84
Proceeds of equity issue to QIBs 0.00 0.00 0.00 0.00 0.00 0.00 800.00
Shareholders' funds total 1182.48 1349.64 1967.82 2412.53 2832.77 3411.25 4879.25
Minority interest 0.00 0.00 0.00 0.85 0.76 0.69 0.63
Non-current liabilities
Long-term borrowings 259.59 526.32 1339.15 1228.10 1615.78 1408.64 1034.83
Deferred tax liabilities 175.57 194.15 251.44 319.50 405.05 396.95 400.92
Other long-term liabilities 0.00 0.00 0.00 20.60 45.41 47.68 50.06
Long-term provisions 38.56 38.87 66.47 107.41 93.91 95.78 97.70
Total 473.71 759.35 1657.06 1675.60 2160.15 1949.06 1583.52
Current liabilities
Short-term borrowings 386.53 364.41 368.00 993.76 933.90 980.60 1034.78
Trade payables 685.48 571.48 1299.11 1199.78 1293.47 1396.95 1474.13
Other current liabilities 6.90 14.57 13.11 444.72 442.19 464.30 487.51
Current maturities of LT debt 0.00 0.00 0.00 258.36 322.33 407.14 523.81
Short-term provisions 72.59 75.23 167.22 323.75 408.94 417.12 425.46
Total 1151.51 1025.68 1847.44 3220.37 3400.84 3666.11 3945.69
Total equities and liabilities 2807.70 3134.66 5472.33 7309.34 8394.52 9027.11 10409.09
Assets
Non-current assets
Fixed assets 1205.14 1401.87 2442.52 3394.29 4023.83 4207.66 4724.24
Capital work-in-progress 94.95 281.41 536.04 357.78 330.55 356.99 585.55
Goodwill 21.50 23.51 117.52 124.97 133.77 140.46 147.48
Non-current investments 5.04 4.60 5.69 11.18 15.82 18.20 20.92
Deferred tax assets (net) 0.00 0.00 0.00 3.30 2.51 2.63 2.77
Long-term loans & advances 0.00 0.00 0.00 263.65 220.67 231.70 443.29
Total 1326.62 1711.39 3101.77 4155.16 4727.14 4957.64 5924.24
Current assets
Inventories 715.15 630.22 992.87 1753.75 1999.11 2119.05 2449.09
Trade receivables 312.90 224.74 786.90 951.66 1145.80 1203.09 1390.47
Cash & cash equivalents 284.71 362.09 348.98 190.89 173.04 380.42 260.02
Short term loans & advances 167.88 205.39 237.22 257.88 334.15 350.85 368.39
Other current assets 0.45 0.83 4.58 0.00 15.29 16.06 16.86
Total 1481.08 1423.27 2370.55 3154.19 3667.38 4069.47 4484.84
Assets total 2807.70 3134.66 5472.33 7309.34 8394.52 9027.11 10409.09

Ratios
Page 8
Apollo Tyres Ltd
Particulars FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E
Market data
EPS (Rs) 5.73 2.76 12.96 8.73 8.13 12.06 12.39
Cash per share (Rs) 5.83 7.18 6.92 3.79 3.43 7.55 4.48
Book value (Rs) 24.21 26.78 39.04 47.87 56.20 67.68 84.09
Margins
EBITDA margins (%) 12.63 8.35 14.47 10.88 9.59 10.27 10.38
EBIT margins (%) 9.86 5.77 11.34 7.82 6.92 7.83 7.78
Net profit margins (%) 5.75 2.79 8.05 4.96 3.37 4.36 4.57
Valuations
P/E (x) 7.60 7.73 5.44 8.08 10.05 8.65 10.30
EV/Sales (x) 0.53 0.32 0.60 0.66 0.56 0.55 0.62
EV/EBITDA (x) 4.20 3.86 4.18 6.06 5.85 5.35 5.97
P/BV (x) 1.80 0.80 1.81 1.47 1.45 1.54 1.52
Dividend yield (%) 1.15 2.11 1.06 0.71 0.61 0.48 0.59
Return Ratio
ROE (%) 22.81 10.31 33.20 18.24 14.47 17.82 14.73
ROA (%) 16.47 9.18 16.82 9.48 10.01 12.10 11.75
ROCE (%) 25.29 12.84 25.05 14.17 14.73 17.60 16.36
Leverage ratio
Debt/equity ratio (x) 0.55 0.66 0.87 1.03 1.01 0.82 0.53
Debt / Total assets (x) 0.23 0.28 0.31 0.34 0.34 0.31 0.25
Interest coverage ratio 5.90 2.96 7.98 3.52 2.93 3.91 4.72
Liquidity ratios
Current ratio (x) 1.29 1.39 1.28 0.98 1.08 1.11 1.14
Quick ratio (x) 0.52 0.57 0.61 0.35 0.39 0.43 0.42
The growth in EPS in FY14 is expected to be low due to the increase in number of shares (to the extent of new equity
shares issued to QIBs), which would thereby result in dilution of EPS.
We expect a fall in ROE, ROA and ROCE as proportionate revenue would not flow-in from the funds raised through
QIP in FY14. The ratios may improve once when the investments made start generating revenue.

Graphical representation – Key financials
Scenario 1 - Without QIP
20,000
15,000
10,000
5,000
15.00
10.00
5.00
0.00
20.00
15.00
10.00
5.00
0.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
1.20
1.00
0.80
0.60
0.40
0.20
0.00
0
4,691 4,984
Sales (Rs)
8,121 8,868
15,514
13,955
12,153
FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E
5.73
2.76
EPS (Rs)
12.96
8.73 8.13
12.06
14.18
FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E
12.63
EBITDA Margin (%)
8.35
14.47
10.88 9.59 10.27 10.37
FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E
9.86
5.77
11.34
7.82
6.92
7.83 7.84
FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E
0.55
0.66
EBIT Margin (%)
Debt / Equity ratio
0.87
1.03 1.01
0.82
0.63
FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E
Page 9
Scenario 2 - With QIP
20,000
15,000
10,000
5,000
15.00
10.00
5.00
0.00
20.00
15.00
10.00
5.00
0.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
1.20
1.00
0.80
0.60
0.40
0.20
0.00
0
4,691 4,984
Apollo Tyres Ltd
Sales (Rs)
8,121 8,868
15,718
13,644
12,153
FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E
5.73
2.76
EPS (Rs)
12.96
8.73 8.13
12.06 12.39
FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E
12.63
EBITDA Margin (%)
8.35
14.47
10.88 9.59 10.27 10.38
FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E
9.86
5.77
EBIT Margin (%)
11.34
7.82
6.92
7.83 7.78
FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E
0.55
0.66
Debt / Equity ratio
0.87
1.03 1.01
0.82
0.53
FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E

Peer comparison
1) Key financial data
Page
10
Apollo Tyres Ltd
Company Name Net Sales EBITDA Depreciation EBIT Interest EBT Tax NP EPS
(Rs cr)
MRF 11,967.32 1272.01 301.81 970.2 158.84 843.25 263.84 579.4 1366.10
Apollo Tyres Ltd 12,153.29 1166.10 325.60 840.50 287.29 556.47 144.35 409.90 8.13
JK Tyre & Ind. Ltd 6,947.10 328.86 121.05 207.81 187.5 -23 15.22 -31.99 -7.79
Ceat Ltd 4,648.99 282.45 72.80 209.65 195.8 24.27 6.09 18.12 5.29
Balkrishna Ind. Ltd 3,016.64 511.97 86.39 425.58 29.2 400.42 131.48 268.94 27.48
Goodyear (BSE) 1,515.93 121.14 19.69 101.45 5.21 96.24 31.65 64.59 28
TVS Srichakra Ltd 1,458.88 134.87 22.71 112.17 57.172 54.99 15.621 39.19 51.18
Falcon Tyres (BSE) 976.755 68.34 12.91 55.43 25.933 38.196 20.276 17.92 5.26
2) Profitability margins
Company Name EBITDA Margin EBIT Margin Net profit Margin
(%) (%) (%)
MRF 10.63 8.11 4.84
Apollo Tyres 9.59 6.92 3.37
JK Tyre & Ind. Ltd 4.73 2.99 -0.46
Ceat Ltd 6.08 4.51 0.39
Balkrishna Ind. Ltd 16.97 14.11 8.92
Goodyear (BSE) 7.99 6.69 4.26
TVS Srichakra 9.24 7.69 2.69
Falcon Tyres (BSE) 7.00 5.68 1.83
3) Market data
Company Name Face Value CMP Market Cap PE Dividend Yield Earnings Yield Dividend
(Rs) (Rs) (Rs cr) (x) (%) (%) (Rs)
MRF 10 11180.00 4741.90 8.18 0.22 12.22 25
Apollo Tyres 1 84.55 4261.53 10.40 0.59 9.62 0.5
JK Tyre & Ind. Ltd 10 115.00 472.18 NM 2.17 NM 2.5
Ceat Ltd 10 105.05 359.73 19.86 0.95 5.04 1
Balkrishna Ind Ltd 2 250.85 2424.68 9.13 0.60 10.95 1.5
Goodyear (BSE) 10 329.75 760.62 11.78 2.12 8.49 7
TVS Srichakra Ltd 10 263.45 201.72 5.15 5.12 19.43 13.5
Falcon Tyres (BSE) 5 22.70 175.86 4.32 7.71 23.17 1.75
Apollo has an edge over MRF (its closest competitor) in terms of revenues from operations, but the higher
employee costs have impacted its profitability margins.
Dividend yield of Apollo is better when compared to MRF.

Industry overview
Page
11
Apollo Tyres Ltd
India has emerged as the hub for the world’s most competitive tyre brands due to the vast availability of raw material
(natural rubber) and growing demand for tyres from both replacement and OEM segments. After a slowdown in FY09, the
industry had witnessed a remarkable recovery thereupon mainly driven by strong revival in automobile demand on the
back of recovery in economy, positive trends in job market and superior living standards. However, the positives of strong
automobile demand growth for the domestic Indian tyre industry are being impacted by the rising import markets.
Raw material availability & reasons for its imports
Tyre Industry is highly raw material intensive constituting nearly 70% of the total manufacturing cost. The
composition of raw-materials as a percentage of total raw material cost is as below:
http://www.atmaindia.org/overview.htm
Butyl rubber update**
Particulars Percentage of total raw material cost
Natural Rubber 44%
Nylon Tyre Cord Fabric 19%
Carbon Black 12%
Rubber Chemicals 5%
Butyl Rubber 4%
PBR 5%
SBR 5%
Others 6%
The tyre sector consumes nearly two-thirds of the overall rubber production. Following are the key reasons for
dependence on imports:
Non-availability: No domestic production of butyl rubber** and specific grades of styrene butadiene rubber
(SBR), including SBR1502 and SBR1712 & ethylene propylene diene monomer.
Insufficient in-house production: The in-house production of nylon tyre cord fabric, polybutadiene rubber,
rubber chemicals, steel tyre cord and polyester tyre cord being insufficient to meet domestic demand.
Financial and strategic reasons: Tyre industry imports raw materials on account of the following factors:
- Duty-free imports permitted against export of tyres; domestic supply not sufficient to meet complete
requirement; technical and commercial considerations;
- Business strategy to have multiple sources of supply.
Reliance Sibur Elastomers Private Limited, a joint venture between Reliance Industries and Sibur (a Russian based
petrochemicals giant and Synthetic rubber producer) was formed in the beginning of the year 2012. RIL holds a 74.9
percent stake in the joint venture, while SIBUR enjoys 25.1 percent share. The JV has made an investment of $450
million to construct 100,000 metric tons per year butyl rubber plant in Jamnagar. The plant is expected to go on stream in
mid-2014.
Synthetic rubber from the jointly owned Jamnagar plant will be aimed at India’s automotive industry, which today
consumes more than 75,000 ton per year, all of it is imported. When completed, the unit—owned 74.9 percent by
Reliance and 25.1 percent by Sibur—will be the world’s fourth-largest butyl rubber producer worldwide. While Reliance
will construct the plant, SIBUR will provide the technology. SIBUR will handle implementing the technology, launching the
plant, and training Indian engineers and workers.

Key value drivers
Page
12
Apollo Tyres Ltd
India Europe South Africa
1. Indian operations are mainly
driven by growing vehicle base in
the domestic market.
2. Furthermore, the manufacturing of
International auto brands in India
is adding to the growth of Indian
tyre industry.
3. Demand for passenger car tyres
is increasing backed by robust
economic growth and rise in
disposable income.
4. Shift in customer focus to budget
car categories.
Expected trends in tyre sales
1. Strong demand for High
performance tyres, such as winter
tyres, run-flat tyres etc. It, in fact,
depends in part on the legislation
in different European countries.
Market share of winter tyres is
higher in countries with legislation
of compulsory winter tyres usage.
2. High performance tyres fall into a
high margin segment impacting
profitability significantly and this
segment carries greater pricing
power due to industry
concentration and demand of
premium cars.
3. Shift in customers focus to energy
efficient and run-flat tyres.
1. Apollo is the leading player in
South Africa with 18% market
share in the truck and passenger
car tyres segments.
2. Imports account for more than
50% of market particularly
dominated by low budget tyres
imported from China.
3. Replacement is expected to
contribute nearly 3/4th of the
industry for next 4-5 years.
4. Industry facing challenges due to
economic environment, lower
capacity utilization & frequent
work stoppages due to
challenging industrial relations.
(Million units)
Year India - Replacement market India - OEM market Europe South Africa
2013E 31 21 484 17.7
2014E 33 22 502 18.5
2015E NA NA 516 19.2
Source: Automotive tyre manufacturers’ association (India) and LMC Automotive (www.lmc-auto.com)
Apollo’s competitive position – Market share by domestic sales (FY12)
o # 1 in truck segment & light commercial vehicle segment
o Ranked #3 in passenger cars segment
4%
14%
11%
19%
4%
Truck Light commercial vehicle Passenger cars
27%
21%
Apollo
MRF
JK
Ceat
Birla
Others
Imports
7%
7%
19%
14%
27%
26%
Apollo
MRF
JK
Ceat
Birla
Others
3%
18%
16%
13%
3%
17%
9%
21%
Apollo
MRF
JK
Ceat
Good Year
Bridgestone
Others
Imports

CANSLIM stock screening strategy
Page
13
Apollo Tyres Ltd
It tends to identify the companies with strong fundamentals, influenced by good sales volumes and rising earnings, driven
by new products or services. This strategy encourages buying these stocks before their prices move up substantially. An
in-depth analysis of Apollo’s fundamentals on the basis of CANSLIM (mnemonic) approach is given below:
C = Current quarterly earnings
This strategy recommends stocks with a minimum rise in quarterly earnings of 18-20% Y/Y. Apollo outperformed the
benchmark with an EPS growth of 96% Y/Y.
(Rs cr)
Particulars Sep-12 Sep-11 Growth Y/Y Jun-12 Growth Q/Q
Total income 3,374.83 2,871.24 17.54% 3,164.70 6.64%
Total Expenditure 3,007.89 2,631.72 14.29% 2,813.12 6.92%
EBITDA 366.94 239.52 53.20% 351.58 4.37%
Depreciation 91.26 77.69 17.47% 93.55 -2.45%
EBIT 275.68 161.83 70.35% 258.03 6.84%
Interest 82.93 69.35 19.58% 75.06 10.48%
Other Income 13.96 6.73 107.43% 9.84 41.87%
EBT 206.71 99.21 108.36% 192.81 7.21%
Tax 53.45 21.07 153.68% 53.92 -0.87%
Reported Profit After Tax 153.26 78.14 96.14% 138.89 10.35%
Share of profit of associate -1.07 -0.43 148.84% -0.89 20.22%
Minority Interest After NP -0.009 -0.06 -85.00% -0.012 -25.00%
Net Profit after Minority Interest 152.20 77.77 95.70% 138.01 10.28%
EPS (Rs) 3.02 1.54 96.10% 2.74 10.22%
A = Annual earnings
Usually, we should pick companies with a proven track record of earnings growth and a potential for earnings
acceleration. During FY09-12, Apollo has shown a CAGR of 34.56% in income from operations, 40.93% in EBITDA and
43.30% in both net profit & EPS.
(Rs cr)
Particulars FY 09 FY10 FY11 FY12
Income from operations 4,984.07 8,120.74 8,867.72 12,153.29
39% 8% 27%
EBITDA 416.15 1,174.88 965.13 1,166.10
65% -22% 17%
Net profit 139.16 653.35 440.16 409.90
79% -48% -7%
EPS (Rs) 2.76 12.96 8.73 8.13
Note: Steep increase in raw material and finance costs has impacted the profits in FY11 & FY12.
79% -48% -7%

N = new products, new management, new highs etc.,
Page
14
Apollo Tyres Ltd
The strategy presumes that a growth in market value of the stock needs a catalyst to initiate a strong price advance. The
catalyst could be a new product or service, a new management team employed after a period of lackluster performance,
or even a structural change in the industry, such as new technology. Apollo is heading with a plan to expand its operations
into new markets – South African operation is proposed to be expanded to the rest of Africa and South America; the
Dutch operations would penetrate into Europe and North America and Indian operations would expand to the Middle East,
the rest of the Asian continent and Australasia.
It, in fact, had also segregated its brands on the basis of price into three segments with top segment covering global niche
premium (Vredestein) and regional premium (Dunlop) brands, medium segment (the brand Apollo) and others segment
covering Maloya, Regal and Kaizen brands.
S = Supply and demand
The emphasis here is on trading volume, particularly during price increases. The approach can be applied to all sizes, i.e.,
large, mid and small cap, depending on the evaluation, but small companies will be more volatile with a higher probability
towards the upside as well as the downside. Apollo’s average daily trading quantity over the last three months was 39.49
lakh shares and the average daily trading turnover was Rs 35.11 crore.
L = Leader or laggard
The focus here is on rapidly growing companies in rapidly expanding sectors – pick the best two or three stocks in a
group. The relative strength compares the performance of a stock in relation to the market as a whole.
Apollo has become the first Indian tyre company to cross the revenue milestone of $2.5 billion.
It holds the leading position in both truck/buses tyres and LCV segments, which comprises more than 60% of the
overall tyres industry, with a market share of 27%.
I = Institutional sponsorship
The model recommends participation of institutional sponsors for the stock to show above-market performance. Analysis
of the FIIs/DIIs holding represents a good resource for the individual investor because it is a well-research stock in the
market. A close look at the company’s shareholding pattern reveals that institutional investors have been fairly positive on
the stock. The company had recently increased the investment limit for foreign institutional investors (FIIs) from 30% to
40% of its paid-up capital. However, it had seen a negative trend in DII holdings, in the last quarter, with a fall in overall
DII holding to 11.23% in September 2012 from 13.36% in June 2012.
M = Market indices
The relative performance of Apollo vis-à-vis CNX Auto clearly shows that the company has outperformed the index,
indicating a superior return probability over market return.
1.50
1.00
0.50
0.00
-0.50
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Apollo CNX Auto

Company overview
Page
15
Apollo Tyres Ltd
Apollo manufactures automotive bias, radial tyres and tubes. It has a well positioned multi-brand strategy with diverse
product offerings, supported by extensive international distribution network. Its product portfolio includes leading brands in
the truck and bus, light truck, passenger car, and farm vehicle segments, which cater to both the OEM and replacement
markets. It has seven manufacturing plants spread across three continents – India, Africa and Europe. It has
demonstrated a capability to grow organically as well as through acquisitions and has transformed itself from a regional
player to a global tyre manufacturer. Apollo's two major subsidiaries include Apollo Tyres South Africa Pty Ltd (previously
known as Dunlop Tyres) and Apollo Vredestein BV in the Netherlands. The company operates through a vast network of
branded, exclusive and multi-product outlets in the three geographies – India, Europe and South Africa. It was
incorporated in the year 1972.
Major brands and the respective market segments catered through them
Brand Segment
Apollo Passenger vehicles, 4x4, truck/bus, light trucks, farm vehicles, off highway tyres and specialty tyres
(Ultra high performance and winter tyres)
Kaizen Commercial vehicles
Regal Passenger vehicles and commercial vehicles
Dunlop Passenger vehicles, 4x4, light trucks, farm vehicles, commercial vehicles and off highway tyres
Vredestein Passenger vehicles, bicycles, 4x4, farm vehicles and specialty tyres (Ultra high performance and winter
tyres)
Maloya Passenger vehicles
Manufacturing locations
Apollo manufacturing plants located at the following locations in the three geographies operated by it:
India Chennai, Vadodara, Perambra and Kalamassery (Kerala)
Africa Durban and Ladysmith (South Africa)
Europe Enschede (Netherlands)
Revenue Segmentation
On an overall basis, replacement market contributed 73% and OEM market contributed 27% of the revenue in FY 12.
Segment-wise breakdown of FY12 revenue was as below:
Segment FY12 FY08
Truck-Bus 47% 63%
Passenger car 35% 18%
Farms and others 11% 11%
Light truck 7% 8%

Page
16
Apollo Tyres Ltd
The company has gradually diversified its product mix through a combination of organic growth and global acquisitions.
OEM
56%
Product wise segmentation
The company is now planning to expand further by spreading its South African operations (Dunlop) to the rest of Africa
and South America, Netherland operations (Vredestein) to penetrate deeper in Europe & North America, and Indian
operations focusing on Middle East, Asia and Australia.
Distribution network
Apollo has an extensive distribution network of 4000 retail dealers (1200 exclusive), 170 sales, service & stock points, 19
state offices and a wide specialist network of Apollo Zone, Apollo CV Zone, Apollo Point, Pragati Kendra in India, 3100
outlets and 12 sales offices in Europe and 900 dealers, 6 sales, service & stock points and 1600 Dunlop Zones in South
Africa.
R&D strengths
Apollo has research and development centres located in India and Netherlands. The company is focussing on gradually
increasing its R&D spend in the coming years. The Indian R&D centre is focussed on commercial vehicles segment while
the Netherlands centre caters to passenger vehicles segment.
New products
India
67%
Replacement
34%
India
Truck bus 65%
Passenger vehicles 16%
Light truck 9%
Off Highway 8%
Others 2%
Exports
10%
OEM
78%
Revenue
Europe
23%
Replacement
19%
Europe
Passenger vehicle 83%
Off Highway 14%
Others 3%
Exports
3%
South Africa
10%
Apollo has been focussing on new product development, especially in the ultra-high performance (UHP) segment. In
2012, it launched ‘Apollo Aspire 4G’, and ‘Vredestein Ultrac Vorti’ & ‘Sportrac 5’ in Europe.
OEM
67%
South Africa
Replacement
2%
Truck bus 40%
Passenger vehicles 30%
Light truck 23%
Off Highway 6%
Others 1%
Exports
31%

Key Milestones
Year Milestones
1972 Year of incorporation
1977 First manufacturing plant in Kerala
1991 Second manufacturing plant in Gujarat
1995 Acquired a plant in Kerala from Premier Tyres
2004 Launched H-Rated tubeless passenger car tyre range in India
2006 Acquired Dunlop Tyres International (Pty) Ltd, South Africa
2006 Launched W-Rated tubeless Ultra High Performance passenger car tyre range in India
2007 Launched branded retread material in India
2007 Launched radial tyres in India for truck and bus
2009 Acquired Vredestein Banden BV, Netherlands
2010 Manufacturing plant in Tamil Nadu for truck radials and car tyres
Growth through acquisitions
Page
17
Apollo Tyres Ltd
Apollo Tyres Ltd has extended its global footprint through overseas acquisition of Dunlop Tyres International (Pty) Ltd,
South Africa and Vredestein Banden BV, Netherlands. This has helped the company to acquire rights for Dunlop in 32
countries in Africa and market its products through the extensive distribution network of Dunlop. Acquisition of Vredestein
gave the company the opportunity to market all its brands and develop Europe as one of its major markets. Vredestein is
now considered as one of the premium brands of Apollo. These acquisitions have benefitted the company in terms of
operational synergies, product range rationalisation, benefits in product development, global brand positioning, enhanced
technological capabilities and developing its research and development facilities.
Partners in growth- Customer base

SWOT analysis
Strengths Weaknesses
Diversified operations across three continents .i.e.,
India, Europe, and South Africa
Strong brand portfolio comprising three key brands
– Apollo, Dunlop and Vredestein and three others-
Kaizen, Regal and Maloya
Wide spread distribution network
Market leader in Indian commercial vehicles
segment
Established player in ultra high performance tyres
and winter tyres in Europe
Page
18
Apollo Tyres Ltd
No presence in the growing two-wheeler segment
Unable to pass on cost increases to customers in
a smooth manner due to intense competition in the
market
Opportunities Threats
Being the market leader in commercial vehicles
segment, it is likely to benefit more from the
increasing radialisation in the truck and bus
segment
Deeper penetration in African and European
markets
Increasing presence in untapped markets, like
South East Asia, South America and Australia
Triple ‘A’ Supply Chain Model
Slowdown in the Indian and European economy
Uncertain economic and political conditions and
currency fluctuations in South Africa
Strong competition from international players, like
Bridgestone and Michelin
Faster decline in truck-bus cross ply segment
requiring increased investment for conversion to
radial facility
Fluctuations in prices of key raw materials, like
natural rubber and crude oil
The best supply chains possess three distinct features – Agile (react speedily to sudden changes in demand or supply),
Adaptable (evolve with market structures and strategies) and Aligned (congruence of interests of all the firms in the supply
network so that companies optimize the chain’s performance when they maximize their interests). Apollo with its extensive
distribution network of 4000 retail dealers in India, 3100 outlets in Europe and outsourced dealer network in Africa is well
positioned to respond to the changes in demand or supply conditions and to evolve with changing market forces. Its
continued focus on vendor relationship management, raw material substitution and procurement from low cost sources
has enabled it to optimize its resources.
Agile Adaptable Aligned
Sustainable
competitive
advantage

Page
19
Apollo Tyres Ltd
Go the distance… Realize your true potential….’The Stakeholders Perspective’
The quest for growth, the desire to cross geographic boundaries to venture into new territories and to evolve as a multicultural
brand, is all about, the brand Apollo. It believes in continuous improvement, tireless search for quality and a
passion to deliver the best, in order to ensure a safe driving experience for its customers.
TYRE SAFETY – THE APOLLO WAY
Technology Deployment: The growing demand for products has led to an increased deployment of technology
across its locations, which helped the group register a growth of 16% in production tonnage, by generating an output
of 510,537 metric tonnes of tyres in FY12 as against 438,524 metric tonnes last year.
You-First – A customer centric approach: It’s all about the focus on detail in everything that Apollo undertakes by
putting the needs of its customers and stakeholders at the forefront, is what that differentiates it from other players.
Refreshing customer experience: With a focus on superior service experience and delivery, the company operates
– Apollo Direct tyre helpline (enables customers to select and buy the appropriate tyre for their vehicle) and Apollo
Super Zone (branded retail outlets with a host of facilities, like internet, lounges and entertainment centers).
Empowering employees – Human Capital Model: Apollo runs a series of programmes for employees, including
Apollo Laureate academy, One-Family (coming together in a spirit of celebration), PACE (online performance and
career management system) and DreamTeam (promotes integration across geographies).
Safe drive initiatives: On-road customer initiatives to create awareness on proper tyre care and maintenance
through the Apollo Safe Drive.
Approachable: Apollo first understands the needs of the customer and then segments the market and develops the
products for niche applications to enable it to provide fuel efficient and cost-saving products to each customer
segment.
Finest product portfolio: Apollo is well-positioned through its multi-brand strategy, including Vredestein in Global
Niche premium; Dunlop in regional premium; Apollo in Global; and Maloya, Regal & Kaizen in global challenger
segments.
Ethical practices: Apollo believes that the key to sustainable success lies in stakeholder value maximization, which
is attainable only through the practice of a few distinct traits in their purest form, including ethics in business and One-
Family notion.
Tyre Maintenance: Apollo being a member of TyreSafe, a leading tyre safety organization educates customers
about the importance of tyre care and maintenance thereby reiterating its inherent attribute of tyre safety.
Young, vibrant and dynamic: Managing and adapting to the change, learning from new experiences is what that
speaks of the young, vibrant and dynamic group.

Disclaimer
KARVY RESEARCH DESK – RETAIL BROKING
Page
20
Apollo Tyres Ltd
J K Jain jambu@karvy.com +91-9618087899
Karvy Stock Broking Limited
“Karvy Centre”, Avenue-4, 2nd Floor, Road No: 10, Banjara Hills, Hyderabad – 500 034. India.
Tel: 91-40-23312454; Fax: 91-40-23311968
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