Last Update 10 Dec 25

APOLLOTYRE: Future Performance Will Reflect Steady Margins Amid Shifting Discount-Rate Environment

Analysts have modestly trimmed their price target on Apollo Tyres, citing slightly lower discount rate assumptions and a marginally softer outlook on long term earnings multiples, while growth and margin expectations remain broadly unchanged. This has resulted in only a small adjustment to their fair value estimate, which now stands near ₹565 per share.

Analyst Commentary

Street research on comparable global alternative asset managers points to a more balanced risk reward setup, with modest target cuts driven by macro and rate related assumptions rather than a collapse in underlying earnings power. For Apollo Tyres, this is being interpreted as a template for how investors might recalibrate expectations when discount rates and long term multiples shift, even as core fundamentals stay intact.

Bullish Takeaways

Bullish analysts note that, in similar names, earnings visibility and fee like income streams remain resilient despite modest price target reductions, reinforcing confidence that Apollo Tyres can sustain its growth trajectory even under slightly higher discount rate frameworks.
Research on global peers suggests that improving capital market conditions and a gradual rebound in risk appetite can support higher valuation multiples over time. If a similar pattern appears in autos and tyres, it could provide upside optionality to Apollo Tyres valuation beyond current targets.
Positive experience with claims, credit quality, and balance sheet strength at comparable financials is seen as analogous to operational discipline and cost control for Apollo Tyres, underpinning the view that margins can be defended and incremental operating leverage can still be unlocked.
The persistence of Overweight and equivalent positive ratings on related cyclicals signals that investors remain willing to pay for scale, diversified product portfolios, and execution reliability. Bullish analysts believe these factors are increasingly reflected in Apollo Tyres positioning.

Bearish Takeaways

Bearish analysts highlight that lower price targets in the broader market, even when driven by modest changes in assumptions, show how sensitive valuations are to discount rates and long term multiple compression, a risk that also caps near term upside for Apollo Tyres.
Ongoing concerns around credit and macro volatility in global research coverage translate into caution on demand cycles, replacement volumes, and export momentum for Apollo Tyres, potentially limiting the pace of earnings upgrades.
Secular flow headwinds and normalization of one off income in related asset heavy sectors are seen as a parallel to more normalized post peak margins for Apollo Tyres, suggesting that the best phase of operating surprise may already be behind the company.
With much of the known positives around cost tailwinds and product mix already embedded in current valuations, incremental re rating for Apollo Tyres may require a clearer catalyst on market share gains or structural ROCE improvement. Some bearish analysts see this as lacking in the near term.

What's in the News

Board meeting scheduled for November 13, 2025, to approve unaudited Q2/H1 FY26 financial results for the period ended September 30, 2025 (company filing)
Board to consider fund raising via issue of non convertible debentures through private placement, within existing shareholder approved borrowing limits under Section 180(1)(c) of the Companies Act, 2013 (company filing)
Proposed NCD issue to be placed before shareholders for approval through a postal ballot process, indicating potential balance sheet and growth funding actions (company filing)

Valuation Changes

Fair Value Estimate is broadly unchanged and remains near ₹565 per share, indicating only a negligible numerical adjustment in the model.
The Discount Rate has fallen slightly from about 15.27 percent to about 15.15 percent, reflecting a modest easing in risk and rate assumptions.
Revenue Growth is effectively unchanged, staying around 6.93 percent in the updated projections.
Net Profit Margin remains broadly stable at approximately 7.48 percent, implying no material shift in long term profitability expectations.
The Future P/E Multiple has edged down slightly from roughly 22.29x to about 22.22x, capturing a small compression in the assumed valuation multiple.

Strategic focus on profitability and product mix shift towards Ultrahigh Performance Tires in Europe is likely to boost margins.
Market share gains and debt reduction efforts in India, U.S., and Middle East will enhance revenue growth and earnings.
High raw material costs and CapEx needs, coupled with missed export opportunities, are pressuring Apollo Tyres' profitability and cash flow.

Catalysts

About Apollo Tyres

Manufactures and sells automotive tires, tubes, and flaps in the Asia Pacific, the Middle East, Africa, Europe, and internationally.What are the underlying business or industry changes driving this perspective?

Apollo Tyres is expecting to see a recovery in demand momentum in both India and Europe, which should positively impact revenue growth in the coming quarters.
The company's strategic focus on enhancing profitability through internal initiatives and a better product mix, especially in Europe with a shift towards the Ultrahigh Performance Tire (UUHP) segment, is likely to boost net margins.
The expected stability and potential reduction in raw material costs, coupled with previous price increases, should help improve gross margins and, consequently, overall earnings.
Continued market share gains in key segments like the domestic passenger car replacement (PCR) and agricultural sectors in India indicate potential revenue growth.
Debt reduction efforts, as seen with a decline in net debt, and plans for growing demand in new markets like the U.S. and Middle East are set to improve net margins and positively impact earnings through reduced interest costs and expanded revenue streams.

Apollo Tyres Earnings and Revenue Growth

Apollo Tyres Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Apollo Tyres's revenue will grow by 6.8% annually over the next 3 years.
Analysts assume that profit margins will increase from 3.2% today to 7.3% in 3 years time.
Analysts expect earnings to reach ₹23.5 billion (and earnings per share of ₹37.24) by about September 2028, up from ₹8.3 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₹20.1 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.6x on those 2028 earnings, down from 37.1x today. This future PE is lower than the current PE for the IN Auto Components industry at 29.3x.
Analysts expect the number of shares outstanding to grow by 1.31% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 14.73%, as per the Simply Wall St company report.

Apollo Tyres Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Elevated levels of raw material costs continue to exert pressure on margins, potentially impacting net margins and profitability if not mitigated.
Declines in domestic OEM segment margins suggest challenges in maintaining profitability across all segments, which could impact overall earnings.
Interest costs remain stable despite reductions in debt, driven by increased working capital borrowings due to profitability challenges, potentially affecting net profitability.
Weak performance in India’s exports, unlike some peers, suggests missed revenue opportunities in global markets, which could affect revenue growth.
High short-term CapEx needs for increasing capacity in passenger car tires could strain cash flows and potentially impact free cash flow generation negatively.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of ₹509.292 for Apollo Tyres based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹600.0, and the most bearish reporting a price target of just ₹399.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹320.8 billion, earnings will come to ₹23.5 billion, and it would be trading on a PE ratio of 21.6x, assuming you use a discount rate of 14.7%.
Given the current share price of ₹485.65, the analyst price target of ₹509.29 is 4.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Future Earnings Stability And Market Challenges Will Offset Expansion Opportunities