APOLLOTYRE

: Margins Supported by Cost Trends, Sponsorship Costs Cap Upside

is navigating a mixed operating environment. Its India business remains resilient, supported by GST rate cuts and export recovery, while Europe continues to weigh on performance amid weak demand. Margins have improved thanks to softer raw material costs, but sponsorship commitments and input cost pressures limit near-term upside. The company is prioritizing profitable growth over chasing volumes, even as it faces challenges in balancing market share and profitability. India vs. Europe Demand Trends: - India demand across replacement and OEM channels stayed healthy in Q3FY26. - Europe showed some growth in October but weakened in November, with core markets subdued. - Longer-term profitability in Europe is expected to improve after the closure of the Enschede facility by June 2026. - Q2FY26 consolidated EBITDA margin rose 130 bps YoY to 14.9%, the highest in six quarters. - Raw material cost softness aided margins, though Q3 trends suggest stable input costs due to rupee depreciation and cyclone-related rubber supply disruptions in Thailand. - Sponsorship of the Indian cricket team (₹580 crore over 2.5 years) will cap near-term margin expansion. - Truck & bus radial (TBR) replacement share stood at 29%, passenger car radial (PCR) replacement at 20% in Q2. - Apollo avoided low-margin PCR OEM tenders, leading to share loss but preserving profitability. - Management emphasizes profitable OEM participation rather than chasing volume. - Analysts highlight the struggle to balance market share vs. profitability, with muted demand recovery and soft margin outlook as near-term headwinds. - Focus remains on profitable growth, cost discipline, and selective OEM participation. - Near-term challenges include European demand weakness, sponsorship costs, and stable input prices, but long-term margin recovery hinges on restructuring in Europe and sustained domestic demand.