Multibagger In 1 Year! Midcap Tyres Stock Showing 19% Upside Potential, Buy, Says Sharekhan

Broking firm Sharekhan retains a Buy call on Apollo Tyres Ltd. (ATL) for a potential upside of up to Rs 19% from its current level with a target price of Rs 472 apiece.

According to the broking firm, ATL is on track to achieve its target for FY2026 as EBITDA margin in FY2023 stands at 13.5% against its target for FY2026 at over 15%. Management is looking for volume-based single-digit growth in the Indian business and flat growth in the European business in FY2024.

Valuation -

Maintain Buy rating with a revised PT of Rs. 472 apiece

Sharekhan said, "We observed that ATL has been actively focussing on the implementation of industry 4.0 practices and efficient manufacturing processes at its plant for an optimum utilisation of resources. The higher level of automation is helping in containing employee costs in limits and keeping the quality of the products under check. Further, ATL is emphasising more on playing its brand equity in the replacement market in place of remaining a piggyback on OEMs, as it is ready to give up certain OEM businesses if it would not justify the desired EBITDA margin."

It added, "Further, the company has been on track in achieving its targets for FY2026, as its EBITDA margin has already improved by 120 bps y-o-y to 13.5% in FY2023 and it has been targeting for >15% kind of EBITDA margin in 2026. While ATL has been continuously focussing on premium products and improvement in the product mix, the soft RM cost trend along with its own cost-control initiatives are likely to support it in sustaining high EBITDA margin."

It added further, "Given the firm's dominating position in the domestic TBR market, the fact that Vision 2026 is on track, the emphasis on premiumisation, and the preference for profitability over simple volume growth, we retain our Buy recommendation on the stock with a revised PT of Rs. 472."

Stock Movement

The share price of ATL last traded at Rs 398.95 apiece on BSE. I declined 1.23% as compared to its previous close of Rs 403.90 apiece.

It traded Rs 409.90 intraday high and Rs 398 apiece intraday low on BSE. The stock's 52-week low is Rs 183.35 apiece and 52 week high is Rs 427.20 apiece.

The stock declined 2.61% in the 1 week. It jumped 29.87% in 3 months. In 1 year, it jumped 112.72%, giving a multibagger return. In 2 years, it gave 80.28% positive return and in 3 years, it gave 259.41% positive returns.

ATL is a midcap Tyres sector company. It has a market capitalisation of Rs 25,337.35 Crore.

Disclaimer

The above midcap stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.