Apollo Tyres Ltd (BOM:500877) (Q1 2027) Earnings Call Highlights: Record India Revenue and …

This article first appeared on GuruFocus.

• Consolidated Revenue: Rs. 74 billion, up 12.8% year-over-year.

• Consolidated EBITDA Margin: 11.7%, down about 150 basis points year-over-year due to raw material cost pressures.

• India Revenue: Rs. 54.6 billion, up 15.6% year-over-year and 4.3% sequentially, marking the highest-ever quarterly revenue for India operations.

• India EBITDA: Rs. 6.5 billion, with a margin of 12% compared to 13.6% in the corresponding period last year.

• Europe Revenue: Euro 147 million, up 0.5% year-over-year.

• Europe EBITDA: Euro 13 million, with a margin of 8.9%, lower than the previous year’s 10.8%.

• Raw Material Costs: Escalated sharply during Q1 by nearly 17%, with an expected sequential inflation of about 8% into Q2.

Release Date: August 07, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Apollo Tyres Ltd (BOM:500877) delivered a strong consolidated top-line growth of 12.8% year-on-year, with India operations achieving their highest-ever revenue of Rs.54.6 billion, up 15.6% YOY.

• The company saw double-digit volume growth across all segments in India, including replacement (13%), OEM (10%), and exports (15%), positioning it ahead of the market in many segments.

• Despite significant raw material cost pressures, Apollo Tyres Ltd (BOM:500877) successfully defended margins through calibrated price increases and disciplined cost control, with July showing a strong start for Q2.

• The company is well-positioned to benefit from anti-dumping duties on Chinese tires in Europe, which is expected to boost its PCR replacement segment, already growing in double digits.

• Apollo Tyres Ltd (BOM:500877) maintains a strong balance sheet with a net debt-to-EBITDA ratio of 0.4, and continues to advance strategic initiatives in R&D, digitalization, and sustainability, including recognition as one of India’s top 30 sustainable companies.

Negative Points

• Consolidated EBITDA margin declined by 150 basis points year-on-year to 11.7%, primarily due to raw material cost pressures, with raw material costs escalating sharply by nearly 17% in Q1.

• The Europe business experienced muted top-line growth of only 0.5% YOY, impacted by the Netherlands plant closure transition and revenue loss from agri tires and truck radial capacity shifts.

• Raw material inflation is expected to continue, with an anticipated 8% sequential increase in Q2, requiring further price hikes of 1-2% in July and August to cover the full cost impact.

• The geopolitical situation in West Asia continues to create headwinds in select international markets, leading to heightened uncertainty and cost volatility in raw materials, energy, and logistics.

• The company faces challenges in the high-end agri tire segment due to capacity constraints, relying on offtake partners for the medium term, which may impact margins and supply stability.

Q & A Highlights

Q: What were the volume growth figures across different channels in the India business, and what is the outlook for each segment?A: Gaurav Kumar, CFO, stated that volume growth was fairly stable across channels, with Replacement at 13%, OEM at 10%, and Exports at 15%. All product categories, barring PBB, saw double-digit growth. The outlook remains strong, with the replacement momentum expected to continue, and the company anticipates good year-on-year growth despite Q2 being a seasonally weaker quarter.

Q: How will the anti-dumping duty on Chinese tires benefit Apollo, and can we expect double-digit growth for the Europe business?A: Gaurav Kumar, CFO, explained that the anti-dumping duty is positive as it will reduce the share Chinese tires had at the lower end of the market, benefiting domestic players like Apollo. The muted top-line growth in Europe was due to the agri tire transition and shifting truck radial capacity, not demand. The PCR replacement segment grew in double-digits, and the company expects Europe operations to pick up growth as the capacity transitions are completed.

Q: Can you provide details on the capacity shifting from the Netherlands to Hungary and India, and the ramp-up timeline?A: Gaurav Kumar, CFO, detailed that the Netherlands plant, which produced about 750,000 tires last year, has stopped production. The large part of this capacity will shift to Hungary, while lower-end 14-inch and 15-inch tires will be transferred to India. This process started in September 2025 and is expected to be completed by September-October 2026. The Spacemaster spare tire capacity has been set up in the Baroda plant with OEM clearances already obtained. For high-end agri tires, where no equivalent capacity exists, the company is resorting to offtake agreements.

Q: How much price hike has been taken in India and Europe to cover commodity inflation, and what is the market’s acceptance?A: Gaurav Kumar, CFO, stated that raw material costs went up roughly 17% in Q1, requiring about an 11-12% price increase. Implemented price increases were about 7-9% in a staggered manner, with further increases announced for Q2, bringing the total to about 9% in TBR and 11% in other categories. The company needs about a 15-16% price increase overall, so at least one to two more increases are needed. In Europe, the raw material basket went up by 8% in Q1, with a total price increase of about 10% needed for Q1 and Q2, but only 3-4% has been implemented so far.

Q: What would the European margins have been without the overlapping costs of the Netherlands closure, and what are the aspirational margins?A: Gaurav Kumar, CFO, indicated that without the overlap costs, European margins would have been around 11%. On a full-year basis, with the manufacturing footprint changes, the company aims to deliver high-teens EBITDA margins in Europe, which was the goal set for the region.

Q: What is the medium-term plan for the high-end agri tire business, given the constraints on expanding the existing OHT capacity?A: Gaurav Kumar, CFO, explained that the existing OHT capacity in Kalamaseri has limitations for expansion. Setting up a new plant elsewhere would not be economically viable for a small capacity. Therefore, the company has identified an offtake partner and plans to continue with this arrangement for the medium term, as setting up a small 10-ton capacity in a new location would not have economic scale.

Q: Why has the revenue growth not reflected the price hikes, and when will the full impact be seen?A: Gaurav Kumar, CFO, clarified that of the 15.6% growth, about 12% is volume-led. The price increases were taken in three lots through the quarter, so only 3-4% flowed into revenue, with the full effect expected in Q2. Since raw material costs are still rising, the company expects to take more price increases in July and August, with the full impact of all increases flowing into H2 revenues. For OEMs with formula-led pricing, there is a quarter delay.

Q: Can you provide the consolidated net debt and CapEx figures for Q1?A: Gaurav Kumar, CFO, reported that the full CapEx for Q1 was Rs. 650 crores at a consolidated level. The net debt-to-EBITDA ratio was 0.4, with absolute net debt at about Rs. 1,700 crores. The company anticipates that the net debt-to-EBITDA ratio will increase slightly in the current year as CapEx ramps up.

Q: What is the breakup of the raw material cost increase, and what is the outlook for natural rubber prices?A: Gaurav Kumar, CFO, stated that about 7-8% of the raw material increase is due to rupee devaluation, with the rest from commodity price increases. Natural rubber prices are expected to cool down from Q3 onwards as seasonal impacts fade. The company expects an 8% sequential raw material inflation in Q2, largely led by natural rubber, with prices moving from an average of Rs. 225 to upwards of Rs. 260.

Q: Has the industry maintained pricing discipline, and what is the current market share in the replacement category?A: Gaurav Kumar, CFO, confirmed that competition has followed with similar magnitude price increases, with some timing differences. The company estimates its market share in TBR replacement is now upwards of 30%, and in passenger car replacement it is 21% plus, having regained some share previously lost.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.