APOLLOTYRE

: Weak Q1 Performance, but Long-Term Strategy Intact

reported weak demand in Q1, with India volume growth showing a low single-digit increase in the replacement segment and a mid-single-digit rise in the OEM segment. This was accompanied by lower export volumes. Despite the muted start to the fiscal year, the company's management is optimistic about an improvement in demand from the second half of FY26. → Q1 Performance Breakdown: Consolidated revenue grew modestly by 4% year-on-year (y-o-y) to ₹6,561 crore. The EBITDA margin, however, fell by 113 basis points (bps) y-o-y to 13.2%, primarily due to severe input cost inflation in its European business. In contrast, the India business showed more resilience, with its operating margin remaining flat y-o-y but improving by over 200 bps sequentially to 13.6%. While replacement volumes were in line with the industry, the company lost market share in the OEM passenger vehicle segment. Competition is expected to intensify with Balkrishna Industries entering the truck bus radial (TBR) and passenger car radial (PCR) segments. Demand Recovery: Management expects demand to pick up from the second half of FY26, driven by the replacement segment. Cost Management: The company anticipates a sequential decline in raw material costs in Q2 and is strategically evaluating its raw material basket to drive margin expansion. This approach is already showing positive results, with its Q1 margins being on par with or ahead of peers. Premiumization and Market Diversification: Apollo Tyres is strategically shifting its focus towards higher-margin premium products and expanding into higher-value markets in Asia, West Asia, and North America. Valuation: The stock is down 9% over the past year and trades at 13.5 times its FY27 estimated earnings, which is a discount to its peers.