Started in 1976, Apollo Tyres (ATL) currently, produces the entire gamut of automotive tyres for both passenger cars and commercial vehicles. Raised performances enabled it, in barely three years, to venture abroad. It has 6 subsidiaries including the recent acquisition of Vredestein Banden B.V., a Dutch tyremaker.
Operating in eight locations, ATL has slowly established itself as a global player. Though it is in the process of diversifying its market, but its operations are very much dependent on one input, rubber. The price of which is as volatile as oil itself. Hence, at the peak of the commodity rally ATL profits were down over 80 per cent in Q2FY2009, while the opposite happened in this quarter (Q2FY2010), when its profits increased 7.86 per cent quarter-on-quarter (QoQ), and 1,210.78 per cent year-on-year (YoY).
With improving operating numbers, institutional interest in the stock has also increased from just 23.50 per cent in March, 2009 to 36.98 in September, 2009. The number of funds holding this stock in the portfolio has also seen an uptick from 29 funds (May, 2009) to 41 funds (October, 2009).
Though the stock is currently trading below its one-year peak value, it is just 9.64 per cent below its historic level of 10.79 price-to-earning (P/E) ratio (3-year median). With an earnings per share (EPS) of Rs 5.70, the stock has rallied 142.07 per cent this year (till November 27), but there is upside room if the company is able to maintain its operating margins.