Recommendation: Buy
CMP = Rs 39
Price target: Rs 47
Key points:
· A strong demand for tyre replacement in the commercial vehicle (CV) segment is triggering a healthy growth for Apollo Tyres, which is the market leader in this segment.
· I expect Apollo Tyres to be one of the top performers in the coming Q2FY2008 results. I expect the revenues of the company to grow by 8.5% and the profit to rise by 99.4% for the forthcoming quarter.
· With improved performance of its subsidiary Dunlop as a result of better utilisation, price hikes and debt restructuring the consolidated picture for the company looks even better.
· I maintain positive outlook on the company considering strong growth potential and sustainable margins. I am revising upwards the earnings estimates for the company by 5.3% for FY2008 and by 10.5% for FY2009.
· I maintain Buy recommendation on the stock with a price target of Rs 47.
