Updated on: 2026-01-23 As of: 2026-01-23 Latest price: Rs 515 (NSE) as of 2026-01-23 Market cap: Rs 33,200 crore Latest earnings period: FY26 Q2 / H1 (ended Sep 30, 2025) Key sources: https://corporate.apollotyres.com/press-and-media/news/financial/q2-h1-fy26/; https://www.screener.in/company/APOLLOTYRE/consolidated/; https://www.kotaksecurities.com/financial-results/apollo-tyres-ltd-q2fy2025-26-results/

Event: Apollo Tyres reported Q2 FY26 consolidated revenue up 6% YoY to Rs 6,831 crore, EBITDA up 16% to Rs 1,021 crore, but net profit down 13% YoY to Rs 258 crore due to Rs 176 crore exceptional restructuring costs. Date: November 13, 2025 Why the Market Reacted: Investors focused on revenue beat and EBITDA margin expansion to 14.9%, viewing it as validation of premiumisation, but overlooked profit dip and H1 net profit plunge to Rs 271 crore from Rs 599 crore YoY. Why This Is Not Just News: Q2 numbers mask underlying pressures like raw material volatility and Europe slowdown; deeper analysis tests if margin gains are sustainable without cost tailwinds, revealing risks to the global expansion thesis.

Apollo Tyres' margin expansion hinges on premiumisation and Europe volumes, but falters if natural rubber prices decouple from crude amid Indian OEM slowdown and restructuring overruns.

Apollo Tyres generates ~65% revenue from India (PCR 45%, TBR 20%) and 35% from Europe via Vredestein and Dunlop brands, with replacement market (70% of India sales) providing stability vs OEM cyclicality. Profits stem from operating leverage: high fixed costs in plants yield margins when volumes/utilization exceed 80%, but raw materials (rubber 50-60% of costs) create volatility—natural rubber (India-sourced) less correlated to crude than synthetic. Premium PCR tyres (e.g., Alnac series) command 20-30% price uplift, boosting mix to 30% of sales, while TBR focuses on fleet contracts. Europe adds premiumisation via Vredestein but suffers overcapacity (Hungary, Netherlands plants at 70% utilization), leading to restructuring. Cash flows fund capex (Rs 1,500-2,000 crore annually for Gujarat/India expansions), with debt at 1.2x EBITDA manageable unless rubber spikes 25% as in FY23. Key vulnerability: India replacement tied to 250mn vehicle parc growth at 4-5% CAGR, but Europe (20% margins target) depends on exports amid EU-China trade risks. Unless premium mix hits 40% and rubber stays below Rs 200/kg, EBITDA margins revert to 12-13% troughs. Thesis fails if OEM share erodes below 25% or Europe losses exceed Rs 200 crore quarterly.

Revenue grew modestly on volume/mix, but H1 FY26 net profit cratered 55% YoY due to Rs 545 crore restructuring hits, dragging ROCE to annualized 8% vs 15% prior year. EBITDA margins held at 14.1% via cost control, but unless exceptional items reverse, FY26 PAT could undershoot Rs 800 crore consensus. Debt steady, but capex ramps risk coverage if margins slip to 12%.

Market fixates on 6% revenue growth and 16% EBITDA jump in Q2, assuming premiumisation structurally lifts margins to 15-16%, but ignores raw material passthrough limits: natural rubber averaged Rs 185/kg in H1 FY26, down 10% YoY, inflating margins artificially—past cycles show 20% rubber hikes erase gains within quarters without price hikes, as OEMs resist. Europe, billed as growth engine, contributed flat volumes amid 70% utilization, with restructuring signaling overcapacity from prior capex; if EU passenger vehicle sales stagnate at 1-2% (post-2024 slowdown), losses persist. India replacement market assumptions embed 6% CAGR, but slowing GDP to 6.5% and EV shift (tyres 20% smaller) cap upside unless Alnac 4G captures 15% share. Non-consensus: 35% revenue from exports vulnerable to rupee at 85/USD boosting costs, and SEBI scrutiny on related-party capex (e.g., Gujarat land deals). Consensus forecasts 12% EPS CAGR overlook downside if rubber-crude spread widens, compressing ROE below 12%. Thesis brittle unless Europe EBITDA turns positive by FY27.

At 15x forward P/E, valuation embeds 12% EPS growth and 14% margins, reasonable vs peers but stretched if FY26 PAT disappoints below Rs 850 crore due to costs. EV/EBITDA 7.5x prices steady debt, but compresses to 6x on 10% rubber spike. No margin of safety unless ROCE rebounds to 18%.

Base case assumes 7% revenue growth, 14% margins with Europe breakeven; probability-weighted target Rs 510 implies 0% upside from current. Bull needs rubber below Rs 180/kg and 10% Europe growth; bear triggers on 20% rubber hike or EU duties.

• Rubber price >Rs 220/kg for 2 quarters without 10% tyre hikes, erasing EBITDA gains as passthrough lags 3-6 months.
• SEBI probe into capex disclosures or EU anti-dumping duties on Indian tyres hitting 20% exports.
• Net debt/EBITDA >2x if Gujarat plant delays push capex to Rs 2,500 crore without H2 cash flows.

Apollo trades at discount to MRF/CEAT on Europe growth potential, but deserves no premium unless utilization hits 85%—higher exposure risks valuation gap if India peers gain OEM share.

• Quarterly rubber procurement costs vs crude oil (target spread <Rs 50/kg).
• Management guidance on Europe restructuring completion and utilization %.
• India replacement volumes and OEM share amid EV tyre transition.

Apollo's thesis rests on premium mix lifting India margins to 15% and Europe stabilizing post-restructuring, but uncertainty looms from rubber volatility (60% costs) and capex digestion. Q2 FY26 showed resilience yet profit fragility, pricing in modest growth without Europe's full drag. Downside skews if raw costs rebound without passthrough, potentially halving ROCE. Investors should monitor H2 FY26 EBITDA ex-exceptionals >Rs 2,000 crore and debt below 1.5x; failure signals multiple contraction to 12x. Track India replacement trends and EU volumes quarterly—bull case intact only if both deliver, else base erodes to flat returns.