Raw Material Relief Boosts

APOLLOTYRE

’s Q2 Margins, But FY28 Outlook Softens

posted a better-than-expected margin recovery in Q2FY26, aided by easing raw material costs and improved product mix. While export and OEM volumes showed promise, concerns around commercial vehicle replacement demand and rising competition in key segments have led to cautious long-term forecasts. - Margin Expansion Driven by Lower Input Costs Apollo’s consolidated EBITDA margin rose 90 bps sequentially, beating consensus estimates. Gross margin expanded 170 bps to 14.9%, supported by a 3% drop in raw material costs. Prices of natural rubber, synthetic rubber, and carbon black remained stable, and the company expects further softening in Q3FY26, which should aid profitability. - Volume Growth Across Segments, Exports Lead India volumes rose 4%, with OEM and replacement segments up 4% and 2%, respectively. Agriculture and two-/three-wheeler categories performed well. Export volumes grew in double digits, and the company expects continued momentum in H2FY26, especially in replacement and commercial OEM demand. - Structural Cost Benefits from European Plant Closure Apollo plans to shut its Enschede plant in the Netherlands by June 2026, which is expected to unlock structural cost efficiencies. This, combined with a better mix toward exports and replacement tyres, should support margin resilience in the medium term. - Competitive Pressure and Demand Risks in FY27–28 Balkrishna Industries’ entry into Apollo’s core TBR and mid-premium PCR segments is expected to intensify competition. Analysts warn of higher discounting and marketing spends, which could squeeze margins. HDFC Securities has cut FY28 EPS estimates by 11.5% due to these pressures. Apollo’s stock is down ~2% YTD, underperforming the Nifty Midcap 50. It trades at 15x FY27 earnings—seen as reasonable but not compelling. While near-term fundamentals are improving, long-term valuation appeal may hinge on execution and competitive dynamics.