4QFY2013 Result Update | Auto Ancillary

May 10, 2013

Apollo Tyres
Performance highlights
Y/E March (consolidated ` cr) 4QFY13 4QFY12 Net sales EBITDA EBITDA Margin (%) Adjusted PAT
Source: Company, Angel Research

ACCUMULATE
CMP Target Price
% chg (yoy) 3QFY13 (6.0) (1.5) 53bp (21.9) 3,217 382 11.9 180 % chg (qoq) (5.6) (6.9) (16)bp (31.5)

`94 `104
12 Months

Investment Period
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code

3,038 356 11.7 123

3,231 361 11.2 158

Tyre 4,758 1,947 1.2 102/74 366,627 1 20,122 6,065 APLO.BO APTY@IN

Weak 4QFY2013 performance: Apollo Tyres (APTY) reported lower-than-expected results for 4QFY2013 owing to sluggish performance across the three geographies due to slowdown in demand. The consolidated top-line declined by 6% yoy (5.6% qoq) to `3,038cr, which was lower than our expectations, largely due to a 9.9% (flat qoq) and 9.3% yoy (24.1% qoq) decline in standalone and South Africa revenues respectively. The revenues at the European operations remained flat in Euro terms due to 3% yoy decline in volumes, however, favorable exchange rates led to a 7.6% yoy (down 10.7% qoq) growth in INR terms. The EBITDA margins declined 16bp qoq and stood at 11.7%, slightly lower than our expectations of 12.2%, despite the 9.1% qoq decline in raw-material expenditure. This was on account of increase in other expenditure which as a percentage of sales surged 220bp qoq led by higher marketing spends and increase in research and development expenditure. Consequently, adjusted net profit declined 21.9% yoy (31.5% qoq) to `123cr. A significant increase in the depreciation expense (up 32.8% yoy and 30.3% qoq) too impacted the bottom-line results. Better-than-expected standalone performance: APTYs standalone net profit at `88cr was ahead of our expectations of `81cr driven by a sharp improvement of 261bp yoy (201bp qoq) in EBITDA margins to 12.1% as the natural rubber cost for the company declined by 29.4% yoy. Nevertheless, the top-line at `2,036cr was below our expectations of `2,180cr due to a 10% yoy drop in volumes on account of the weak OEM demand and also due to slower off-take in the replacement segment. Outlook and valuation: We lower our volume estimates for FY2014/15 to account for the continued weak demand environment in India and Europe as guided by the management. However, we expect the operating margins to remain stable as the company will continue to benefit from the softening of commodity prices. Given the slowdown in demand and drop in utilization levels across the geographies, APTY has scaled down the capital expenditure guidance for FY2014 to `550cr. Further, the company has also put on hold the proposed US$150mn QIP issue. At `94, the stock is trading at 6.3x FY2015 earnings. We maintain our Accumulate rating on the stock with a target price of `104.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 43.4 14.4 29.2 13.0

Abs. (%) Sensex Apollo Tyres

3m 3.1 9.3

1yr 22.3 15.4

3yr 15.9 36.9

Key financials (Consolidated)

Y/E March (` cr) Net Sales % chg Net Profit % chg EBITDA (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2012 12,153 37.1 411 (4.3) 9.4 8.1 11.5 1.7 15.7 14.9 0.6 6.2

FY2013E 12,795 5.3 596 45.1 11.4 11.8 8.0 1.4 19.1 17.3 0.5 4.6

FY2014E 13,852 8.3 647 8.7 11.4 12.8 7.3 1.2 17.5 17.5 0.5 4.2

FY2015E 15,487 11.8 750 15.9 11.5 14.9 6.3 1.0 17.3 18.0 0.4 3.8

Yaresh Kothari
022-3935 7800 Ext: 6844 yareshb.kothari@angelbroking.com

Please refer to important disclosures at the end of this report

Apollo Tyres | 4QFY2013 Result Update

Exhibit 1: Quarterly financial performance (Consolidated)

Y/E March (` cr) Net Sales Consumption of RM (% of Sales) Staff Costs (% of Sales) Purchase of traded goods (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM (%) Interest Depreciation Other Income PBT (excl. Extr. Items) Extr. Income/(Expense) PBT (incl. Extr. Items) (% of Sales) Provision for Taxation (% of PBT) Share in profit/(loss of asso. Minority interest Reported PAT Adjusted PAT Adj. PATM Equity capital (cr) Reported EPS (`) Adjusted EPS (`)
Source: Company, Angel Research

4QFY13 3,038 1,675 55.1 375 12.3 121 4.0 511 16.8 2,682 356 11.7 74 120 44 206 (17) 223 7.3 82 36.7 (1) 0 140 123 4.1 50.4 2.8 2.4

4QFY12 3,231 1,908 59.1 302 9.4 202 6.2 458 14.2 2,870 361 11.2 78 90 17 210 210 6.5 51 24.6 (0) 0 158 158 4.9 50.4 3.1 3.1

% chg (yoy) (6.0) (12.2) 24.0 (39.8) 11.5 (6.6) (1.5) (5.2) 32.8 163.6 (1.8) 6.3 58.5

3QFY13 3,217 1,842 57.3 356 11.1 168 5.2 469 14.6 2,835 382 11.9 81 92 27 236 236 7.3 56 23.6 (1) 0

% chg (qoq) (5.6) (9.1) 5.4 (27.8) 8.8 (5.4) (6.9) (8.0) 30.3 63.8 (12.9) (5.8) 46.2

FY2013 12,795 7,343 57.4 1,471 11.5 654 5.1 1,870 14.6 11,338 1,457 11.4 313 397 94 842 (17) 859 6.7 245 28.5 (0) 0

FY2012 12,153 7,379 60.7 1,335 11.0 658 5.4 1,615 13.3 10,987 1,166 9.6 287 326 33 586 29 556 4.6 144 25.9 (0) 0 412 441 3.6 50.4 8.2 8.8

% chg (yoy) 5.3 (0.5) 10.2 (0.6) 15.8 3.2 24.9 8.9 21.8 189.4 43.7 54.3 69.6

(11.2) (21.9)

180 180 5.6 50.4

(22.1) (31.5)

613 597 4.7 50.4

49.0 35.2

(11.2) (21.9)

3.6 3.6

(22.1) (31.5)

12.2 11.8

49.0 35.2

Exhibit 2: 4QFY2013 Actual vs Angel estimates

Y/E March (` cr) Net Sales EBITDA EBITDA margin (%) Adj. PAT
Source: Company, Angel Research

Actual 3,038 356 11.7 123

Estimates 3,228 394 12.2 181

Variation (%) (5.9) (9.6) (48)bp (32.0)

Lower-than-expected growth in net sales: For 4QFY2013, APTYs consolidated top-line declined by 6% yoy (5.6% qoq) to `3,038cr, which was lower than our expectations of `3,228cr, largely on account of a 9.9% (flat qoq) and 9.3% yoy (24.1% qoq) decline in standalone and South Africa revenues respectively. While the revenues at the European operations remained flat in Euro terms due to 3% yoy decline in volumes; favorable exchange rate movement led to a 7.6% yoy (down 10.7% qoq) growth in INR terms. On the standalone front, the company registered a volume decline of 10% yoy on account of the weak OEM demand and also due to slower off-take in the replacement segment. The Management stated that the utilization level across the three geographies remains in the range of 70-80%.

May 10, 2013

Apollo Tyres | 4QFY2013 Result Update

Exhibit 3: Lower-than-expected growth in net sales

( ` cr) 4,000 3,500 3,000 2,500 2,000 1,500 27.3 18.4 12.1 17.5 (0.3) (6.0) 55.0 Net sales 47.3 36.3 % chg (%) 60.0 50.0 40.0 30.0 20.0

Exhibit 4: Revenue-mix Geography-wise

( ` cr) 2,500 2,000 1,500 1,000 500 354 0 280 302 383 339 393 391 406 308 749 820 677 650 795 816 729 1,961 1,762 India South Africa Europe 2,283 2,259 2,152 2,093

2,036

2,036

1,845

623

2,730

2,822

2,871

3,228

3,231

3,165

3,375

3,217

3,038

1,000 500 0

10.0 0.0 (10.0)

604

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

Source: Company, Angel Research

4QFY13

Source: Company, Angel Research

Exhibit 5: Segmental performance

Y/E March Revenue (` cr) India SA Europe Others EBIT (` cr) India SA Europe Others EBIT margin (%) India SA Europe
Source: Company, Angel Research

4QFY13

4QFY12

% chg (yoy)

3QFY13

% chg (qoq)

FY2013

FY2012

% chg (yoy)

2,036 308 729 32 215 (7) 86 (2) 10.6 (2.4) 11.7

2,259 339 677 29 172 (11) 119 5 7.6 (3.3) 17.5

(9.9) (9.3) 7.6 11.1 25.0 (28.0) (134.5)

2,036 406 816 53 169 5 141 4 8.3 1.2 17.2

0.0 (24.1) (10.7) (40.0) 27.0 (39.2) (148.9)

8,507 1,497 2,990 184 735 (1) 432 (8) 8.6 (0.1) 14.5

8,158 1,305 2,850 105 499 (43) 386 1 6.1 (3.3) 13.6

4QFY13

4.3 14.8 4.9 75.1 47.4 11.9 (690.1)

EBITDA margins at 11.7%, but still below our expectations of 12.2%: On the operating front, EBITDA margins declined 16bp qoq and stood at 11.7%, which was slightly lower than our expectations of 12.2%, despite the 9.1% qoq decline in raw-material expenditure. This was on account of increase in other expenditure which as a percentage of sales surged 220bp qoq led by higher marketing spends and increase in research and development expenditure. Employee expense as a percentage of sales too witnessed an increase of 80bp on a sequential basis. However, on a yoy basis, EBITDA margins improved 53bp driven by softening of natural rubber prices which led to a 12.2% yoy decline in raw-material costs. At the standalone level, EBITDA margins witnessed a sharp improvement of 261bp yoy (201bp qoq) to 12.1% as the natural rubber cost for the company declined by 29.4% yoy.

May 10, 2013

Apollo Tyres | 4QFY2013 Result Update

Exhibit 6: Average natural rubber price trend

( ` /kg) 250
195 225 229 177 211 203

Exhibit 7: EBITDA margin at 11.7%

(%) 75.0 64.5 66.0 EBITDA margin 67.0 66.3 Raw-material cost/sales 65.3 61.8 66.2 62.5 59.1

200 150
98 102 142 119

191 193

165

181 174

65.0
160

55.0 45.0 35.0 25.0 11.3 10.3 11.2 11.1 10.9 11.9 11.7

100 50 0

72

15.0 5.0

8.2

8.3

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY09

2QFY10

4QFY10

2QFY11

4QFY11

2QFY12

4QFY12

2QFY13

Source: Company, Angel Research

4QFY13

Source: Company, Angel Research

Adjusted net profit growth at `123cr: APTYs adjusted profit at `123cr (down 21.9% yoy and 31.5% qoq) came in below our expectations of `181cr due to lower-than-expected growth in top-line and also due to significant increase in the depreciation expense (up 32.8% yoy and 30.3% qoq). During 4QFY2013, APTY reported an exceptional gain of `17cr at its South African operations, relating to pension fund surplus. As a result, the reported profit stood at `140cr (down 11.2% yoy and 22.1% qoq).

Exhibit 8: Adjusted net profit at `123cr

(` cr) 250 200 4.9 150 100 50 0 2.7 2.7 3.0 4.4 4.5 7.1 5.6 4.1 Net profit Net profit margin (RHS) (%) 8.0 7.0 6.0 5.0 4.0 3.0 2.0

193

157

138

152

181

123 4QFY13

77

78

98

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

Source: Company, Angel Research

May 10, 2013

3QFY13

4QFY13

1.0 0.0

Apollo Tyres | 4QFY2013 Result Update

Exhibit 9: Quarterly financial performance (Standalone)

Y/E March (` cr) Net Sales Consumption of RM (% of Sales) Staff Costs (% of Sales) Purchase of traded goods (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM (%) Interest Depreciation Other Income PBT (excl. Extr. Items) Extr. Income/(Expense) PBT (incl. Extr. Items) (% of Sales) Provision for Taxation (% of PBT) Reported PAT Adjusted PAT Adj. PATM Equity capital (cr) Reported EPS (`) Adjusted EPS (`)
Source: Company, Angel Research

4QFY13 2,036 1,346 66.1 100 4.9 52 2.6 292 14.4 1,790 246 12.1 63 56 25 152 152 7.5 64 42.0 88 88 4.3 50.4 1.8 1.8

4QFY12 2,259 1,652 73.1 95 4.2 53 2.3 245 10.9 2,045 214 9.5 67 52 10 106 106 4.7 33 31.5 72 72 3.2 50.4 1.4 1.4

% chg (yoy) (9.9) (18.6) 5.6 (1.7) 19.3 (12.5) 15.0 (5.6) 6.8 141.5 44.3 44.3 92.4 22.1 22.1

3QFY13 2,036 1,373 67.5 110 5.4 71 3.5 277 13.6 1,831 205 10.1 67 55 19 103 103 5.0 29 28.0 74 74 3.6 50.4

% chg (qoq) 0.0 (2.0) (9.3) (26.4) 5.7 (2.2) 20.0 (5.9) 1.6 29.4 48.5 48.5 122.8 19.5 19.5

FY2013 8,507 5,860 68.9 427 5.0 254 3.0 1,069 12.6 7,609 898 10.6 261 220 57 475 475 5.6 162 34.1 313 313 3.7 50.4

FY2012 8,158 5,997 73.5 369 4.5 238 2.9 888 10.9 7,492 666 8.2 241 186 18 258 258 3.2 76 29.6 181 181 2.2 50.4 3.6 3.6

% chg (yoy) 4.3 (2.3) 15.8 6.5 20.4 1.6 34.8 8.2 18.5 215.4 84.3 84.3 112.6 72.4 72.4

22.1 22.1

1.5 1.5

19.5 19.5

6.2 6.2

72.4 72.4

Net sales down on 10% yoy decline in volumes: On a standalone basis, APTY posted a 9.9% yoy (flat qoq) decline in the top-line to `2,036cr, which was lower than our expectations of `2,180cr. The top-line performance was mainly impacted due to the slowdown in the OEM demand for medium and heavy commercial vehicle and passenger car tyres which led to a ~10% yoy (~1% qoq) decline in standalone volumes. Though the replacement segment witnessed a slight up-tick, the growth was not meaningful and failed to negate the impact of slowdown in OEM demand. The net average realization remained flat on a yoy as well as qoq basis led by better product-mix. Effective March 15, 2013, APTY undertook an average price cut of ~1%. While the prices in the passenger car segment were slashed by ~2%; a 0.5% price cut was taken in the truck and light commercial vehicles cross ply tyres. The company indicated that there were no price cuts in the truck and bus radial tyres segment.

May 10, 2013

Apollo Tyres | 4QFY2013 Result Update

Exhibit 10: Top-line down due to slowdown in demand

(`cr) 2,500 2,000 1,500 1,000 34.2 74.9
Net sales yoy change (RHS)

56.9 46.2 28.2 9.8 23.7 (2.7) (9.9)

500 0

(%) 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 (10.0) (20.0)

1,762

1,961

1,845

2,093

2,259

2,152

2,283

2,036

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

Source: Company, Angel Research

Operating margin recovers sharply to 12.1%: APTYs EBITDA margins witnessed a sharp recovery to 12.1%, an expansion of 261bp yoy (201bp qoq) largely driven by softening of natural rubber prices. Due to the softening of natural rubber prices, the natural rubber cost of the company declined by 29.4% yoy leading to a ~18% yoy decline in raw-material expenses. The other expenditure however, grew by a significant 19.3% yoy (5.7% qoq) led by higher advertisement expenses (to enhance the brand visibility) and increase in research and development cost.

Exhibit 11: Average raw-material cost trend

Particulars Natural rubber Nylon tyre cord fabric Carbon black
Source: Company, Angel Research

4QFY13 180 230 78

4QFY12 255 210 75

% chg (yoy) (29.4) 9.5 4.0

3QFY13 190 235 80

4QFY13

2,036

% chg (qoq) (5.3) (2.1) (2.5)

Standalone net profit at `88cr: The standalone net profit grew strongly by 22.1% yoy (19.5% qoq) to `88cr largely on the back of the better-than-expected EBITDA margins. Higher other income (up 141.5% yoy and 29.4% qoq) also benefited the profitability during the quarter.

Exhibit 12: EBITDA margin improves to 12.1%

(%) 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 7.6 7.6 7.3 8.1 9.5 10.3 9.9 10.1 12.1 75.3 EBITDA margin 77.0 77.0 76.5 75.5 Raw material cost/sales 72.9 74.6 70.9 68.6

Exhibit 13: Net profit grows strongly

( ` cr) 100 90 80 70 60 50 40 30 20 10 0 Net profit 3.8 3.2 2.3 1.2 2.0 Net profit margin (RHS) 4.3 3.5 3.3 3.6 (%) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0

66

44

22

43

72

75

75

74

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

Source: Company, Angel Research

Source: Company, Angel Research

May 10, 2013

4QFY13

88

Apollo Tyres | 4QFY2013 Result Update

Investment arguments
Tyre industry set for a structural shift: Currently, manufacturing radial tyres is far more capital intensive than manufacturing cross-ply tyres. The investment required for radial tyres per tpd is 3.2x that of cross-ply tyres at `6.1cr/tpd. On the other hand, the selling price of radial tyres is ~20% higher than that of cross-ply tyres. Thus, to generate a similar RoCE and RoE, tyre companies would need to earn EBITDA margin of ~21% compared to ~9% earned on cross-ply tyres, considering the difference in capital requirements and the consequent impact on asset turnover, interest cost and depreciation. Therefore, higher capital requirements will help protect margins from upward-bound input costs, as the business model evolves, bearing in mind final RoEs rather than margins. With the sector set for a structural shift and the apparent pricing flexibility, RoCE and RoE of tyre manufacturers are expected to improve going forward. Riding on high domestic demand: The Indian tyre industry is currently witnessing a slowdown in demand from the replacement as well as OEM markets, primarily due to macro-economic concerns. However the demand scenario in the long term remains encouraging which will aid APTY to operate at optimal capacities. Strategic overseas investment offers synergies in the long term: Acquisitions done by the company in the past two-three years are increasingly contributing to its revenue. We estimate Vredestein Banden combined with Dunlop SA to contribute close to ~35% to the companys overall consolidated revenue, helping it to further strengthen its foothold in the Indian tyre industry. Acquisitions offer synergies by way of access to radial tyre technology, wider product portfolio and presence in newer geographies.

Outlook and valuation

We lower our volume estimates for FY2014/15 to account for the continued weak demand environment in India and Europe as guided by the management. However, we expect the operating margins to remain stable as the company will continue to benefit from the softening of commodity prices.

Exhibit 14: Change in estimates

Y/E March (` cr) Net sales OPM (%) EPS (`) Earlier Estimates FY2014E 14,401 11.4 13.6 FY2015E 15,841 11.5 15.9 Revised Estimates FY2014E 13,852 11.4 12.8 FY2015E 15,487 11.5 14.9 % chg FY2014E (3.8) 4bp (5.6) FY2015E (2.2) 4bp (6.3)

Source: Company, Angel Research

Given the slowdown in demand and drop in utilization levels across the geographies, APTY has scaled down the capital expenditure guidance for FY2014 to `550cr. Further, the company has also put on hold the proposed US$150mn QIP issue. Nevertheless, we remain positive on the domestic tyre industry in view of the structural shift that the industry is witnessing and also due to the softening of

May 10, 2013

Apollo Tyres | 4QFY2013 Result Update

natural rubber prices. We expect the company to register a 10% and 12.2% CAGR in net sales and net profit respectively over FY2013-15. At `94, the stock is trading at 6.3x FY2015 earnings. We maintain our Accumulate rating on the stock with a target price of `104. Key downside risks to our call: A sharp rise in input costs from current levels, slower growth in international business and lower-than-anticipated domestic replacement demand pose downside risks to our estimates.

Exhibit 15: Angel vs consensus forecast

Angel estimates FY2014E Net sales (` cr) EPS (`) 13,852 12.8 FY2015E 15,487 14.9 Consensus FY2014E 14,283 13.8 FY2015E 15,583 15.6 Variation (%) FY2014E (3.0) (6.9) FY2015E (0.6) (4.6)

Source: Company, Angel Research

Exhibit 16: One-year forward P/E band

(` ) 160 140 120 100 80 60 40 20 0 CMP (`) 2.0 5.0 8.0 11.0

Exhibit 17: One-year forward P/E chart

(x) 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 One-yr forward P/E Five-yr average P/E

Dec-06

Mar-11

Dec-11

Apr-06

May-08

Aug-12 Aug-12

Jul-05

Sep-07

Jul-10

Source: Company, Angel Research

May-13

Dec-05

Dec-06

Nov-07

Mar-04

Aug-10

Source: Company, Angel Research

Exhibit 18: One-year forward EV/EBITDA band

( ` cr) 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 EV (`cr) 2.0 4.0 6.0 8.0

Exhibit 19: One-year forward EV/EBITDA chart

(x) 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 One-yr forward EV/EBITDA Five-yr average EV/EBITDA

Dec-04

Dec-09

Aug-06

Jun-07

Aug-11

Feb-04

Oct-05

Feb-09

Oct-10

Jun-12

Apr-03

Apr-08

May-13

0.0

May-08

Source: Company, Angel Research

Source: Company, Angel Research

May 10, 2013

May-13

Jul-05

Sep-07

Feb-09

Dec-06

Jul-10

Mar-11

Dec-11

Apr-06

Oct-09

May-13

Feb-09

Sep-09

Jan-05

Oct-08

Jun-12

Apr-03

Oct-09

Jul-11

Apollo Tyres | 4QFY2013 Result Update

Exhibit 20: Auto Ancillary Recommendation summary

Company Apollo Tyres* Ceat JKI* Reco. Accumulate Buy Buy CMP (`) 94 114 115 Tgt. price (`) 104 170 154 Upside (%) 10.6 49.3 34.0 P/E (x) FY14E 7.3 2.8 3.1 FY15E 6.3 2.3 2.6 EV/EBITDA (x) FY14E 4.2 2.3 4.1 FY15E 3.8 1.8 3.9 RoE (%) FY14E 17.5 17.3 16.4 FY15E 17.3 17.6 16.6 FY13-15E EPS CAGR (%) 12.2 11.3 4.4

Source: Company, Angel Research; Note: *Consolidated

Company background
Apollo Tyres (APTY) is India's second largest tyre manufacturer with an overall tyre market share of ~18%. The company has a leadership position in the heavy and light commercial vehicle tyre segments, with a 23% and 26% market share respectively. APTY acquired Dunlop's South African operations in 2006 and Vredestein Branden BV (Netherlands) in May 2009. These acquisitions now account for ~35% of APTY's consolidated revenue. The company has eight manufacturing plants located across India (1,400TPD), South Africa (175TPD) and Europe (170TPD), with a total installed capacity of 1,750TPD. APTY's main brands include Apollo (India); Dunlop (South Africa); and Maloya, Regal and Vredestein (Europe).

May 10, 2013

Apollo Tyres | 4QFY2013 Result Update

Profit and loss statement (Consolidated)

Y/E March (` cr) Total operating income % chg Total expenditure Net raw material costs Other mfg costs Employee expenses Other EBITDA % chg (% of total op. income) Depreciation & amortization EBIT % chg (% of total op. income) Interest and other charges Other income Recurring PBT % chg Extraordinary items PBT (reported) Tax (% of PBT) PAT (reported) Minority interest PAT (reported) ADJ. PAT % chg (% of total op. income) Basic EPS (`) Adj. EPS (`) % chg FY2010 FY2011 FY2012 FY2013E FY2014E FY2015E 8,121 62.6 6,936 4,581 539 1,088 727 1,185 180.7 14.6 254 931 216.9 11.5 134 177 973 357.3 59 914 261 28.5 653 0 653 594 325.3 7.3 13.0 11.8 325.3 8,868 9.2 7,895 5,322 629 1,134 810 972 (18.0) 11.0 272 700 (24.8) 7.9 204 62 558 (42.6) 11 547 106 19.4 441 1 440 429 (27.8) 4.8 8.7 8.5 (27.8) 12,153 37.1 11,007 8,037 746 1,335 889 1,146 17.9 9.4 326 821 17.2 6.8 297 32 556 (0.5) (1) 556 144 25.9 412 2 410 411 (4.3) 3.4 8.1 8.1 (4.3) 12,795 5.3 11,338 7,997 910 1,471 960 1,457 27.1 11.4 397 1,060 29.2 8.3 313 94 842 51.5 (17) 859 245 28.5 614 1 613 596 45.1 4.7 12.2 11.8 45.1 13,852 8.3 12,267 8,657 956 1,601 1,053 1,585 8.8 11.4 417 1,167 10.1 8.4 322 55 901 7.0 901 252 28.0 649 1 647 647 8.7 4.7 12.8 12.8 8.7 15,487 11.8 13,699 9,718 1,070 1,734 1,177 1,787 12.8 11.5 442 1,345 15.3 8.7 362 61 1,044 15.9 1,044 292 28.0 752 1 750 750 15.9 4.8 14.9 14.9 15.9

May 10, 2013

10

Apollo Tyres | 4QFY2013 Result Update

Balance sheet statement (Consolidated)

Y/E March (` cr) SOURCES OF FUNDS Equity share capital Reserves & surplus Shareholders Funds Minority Interest Total loans Deferred tax liability Other long term liabilities Long term provisions Total Liabilities APPLICATION OF FUNDS Gross block Less: Acc. depreciation Net Block Capital work-in-progress Goodwill Investments Long term loans and advances Other noncurrent assets Current assets Cash Loans & advances Other Current liabilities Net current assets Total Assets 2,439 349 310 1,780 1,614 824 3,926 5,563 3,120 2,443 536 118 6 6,895 3,501 3,394 358 125 11 264 3,154 191 258 2,705 2,227 928 5,079 8,034 4,011 4,024 331 134 16 221 3,667 173 349 3,145 2,467 1,200 5,925 8,545 4,407 4,138 352 144 55 181 3,657 335 301 3,022 2,214 1,444 6,312 9,073 4,824 4,248 373 144 109 181 4,241 402 416 3,424 2,297 1,944 7,000 9,601 5,266 4,335 395 144 109 181 5,141 547 465 4,130 2,314 2,827 7,991 50 1,917 1,968 0 1,707 251 3,926 50 2,362 2,413 1 2,222 316 21 107 5,079 50 2,782 2,833 1 2,550 403 45 94 5,925 50 3,350 3,401 0 2,282 493 27 109 6,312 50 3,938 3,989 0 2,382 493 27 109 7,000 50 4,629 4,680 0 2,682 493 27 109 7,991 FY2010 FY2011 FY2012 FY2013E FY2014E FY2015E

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Apollo Tyres | 4QFY2013 Result Update

Cash flow statement (Consolidated)

Y/E March (` cr) Profit before tax Depreciation Change in working capital Others Other income Direct taxes paid Cash Flow from Operations (Inc.)/Dec. in fixed assets (Inc.)/Dec. in investments Other income Cash Flow from Investing Issue of equity Inc./(Dec.) in loans Dividend paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in cash Opening Cash balances Closing Cash balances FY2010 FY2011 FY2012 FY2013E FY2014E FY2015E 973 254 (115) 637 (177) (261) 1,312 (3,627) (1) 177 (3,452) 816 44 1,266 2,126 (13) 362 349 558 272 (261) 16 (62) (106) 416 (1,161) (5) 62 (1,105) 515 29 (14) 530 (158) 349 191 556 326 (291) 345 (32) (144) 759 (1,121) (5) 32 (1,094) 328 29 (59) 299 (18) 191 173 842 397 (81) 114 (94) (245) 932 (531) (39) 94 (476) (268) 29 (297) 162 173 335 901 417 (465) (55) (252) 546 (550) (55) 55 (550) 100 29 71 67 335 402 1,044 442 (770) (61) (292) 363 (550) 0 61 (489) 300 29 271 145 402 547

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Apollo Tyres | 4QFY2013 Result Update

Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Int.) 0.7 1.1 6.9 0.8 2.1 3.4 0.8 2.1 2.8 0.6 1.3 3.4 0.5 1.2 3.6 0.4 1.1 3.7 2.1 36 23 41 19 1.4 57 36 65 25 1.6 56 31 59 26 1.5 57 30 49 30 1.6 57 33 47 35 1.7 61 37 42 45 29.3 26.0 35.8 15.6 14.3 19.6 14.9 14.3 15.7 17.3 17.7 19.1 17.5 17.7 17.5 18.0 18.1 17.3 11.5 0.7 2.9 23.6 7.4 0.6 32.7 7.9 0.8 2.1 13.3 8.4 0.8 17.1 6.8 0.7 2.3 11.4 9.2 0.8 13.3 8.3 0.7 2.2 12.9 9.3 0.7 15.4 8.4 0.7 2.2 13.4 9.9 0.5 15.1 8.7 0.7 2.2 13.8 10.3 0.4 15.4 13.0 11.8 16.8 0.7 39.0 8.7 8.5 13.9 0.5 47.9 8.1 8.1 14.6 0.5 56.2 12.2 11.8 20.0 0.5 67.5 12.8 12.8 21.1 0.5 79.1 14.9 14.9 23.6 0.5 92.8 7.3 5.6 2.4 0.8 0.8 5.2 1.6 10.8 6.8 2.0 0.5 0.8 7.0 1.3 11.5 6.5 1.7 0.5 0.6 6.2 1.2 8.0 4.7 1.4 0.5 0.5 4.6 1.1 7.3 4.5 1.2 0.5 0.5 4.2 0.9 6.3 4.0 1.0 0.5 0.4 3.8 0.8 FY2010 FY2011 FY2012 FY2013E FY2014E FY2015E

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Apollo Tyres | 4QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Apollo Tyres No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

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