ICICI Securities has maintained its BUY rating on Apollo Tyres following strong quarterly results and visible sector tailwinds. The target price is set at Rs 605 for a 12-month horizon, implying notable upside from current levels. Investors are advised to monitor evolving sector dynamics and Apollo Tyres' debt reduction and margin improvement. Key takeaways include GST reforms benefiting auto demand, recovery in margins due to reduced raw material costs, and the company's strategic positioning for future growth.

Strong BUY Recommendation From ICICI Securities

ICICI Securities has reaffirmed a BUY stance on Apollo Tyres , assigning a compelling target of Rs 605 over the next year and emphasizing healthy operating performance, sectoral momentum, and balance sheet strength. The current market price (CMP) is Rs 520, which offers significant return potential for medium-term investors. The rating rationale centers on Apollo Tyres’ ability to leverage industry tailwinds and maintain robust fundamentals.

GST Reforms Delivering Structural Boost

The recent GST rate rationalization for the entire automobile sector has turbocharged domestic tyre demand, significantly enhancing Apollo Tyres’ cost competitiveness and stimulating growth across both OEM and replacement channels. New tax slabs—reduced from 28% to 18% on tyres and from 12% to 5% for tractor tyres—are set to lift volumes and profit margins for Apollo Tyres, making it one of the principal beneficiaries within the industry.

Solid Quarterly Financial Performance

Apollo Tyres posted consolidated revenues of Rs 6,831 crore in Q2FY26, registering a 6% year-on-year increase; EBITDA advanced to Rs 1,021 crore, with margins improving 170 basis points quarter-on-quarter to 14.9%. Standalone EBITDA margins reached 15.3%, a testament to efficient cost management. Net profit was Rs 258 crore, reflecting resilience amid one-time exceptional charges associated with plant restructuring.

Raw Material Price Correction Aids Margins

Blended raw material prices fell by 3% sequentially in Q2FY26, driving gross margin expansion of 140 basis points and sustaining a healthy margin trajectory. Historically, Apollo Tyres’ margins have been volatile due to raw material price swings, but present conditions suggest continued stability and margin strength supported by prudent cost controls.

Debt Reduction Improves Financial Flexibility

Net debt has been aggressively trimmed from Rs 6,000 crore in FY20 to Rs 2,600 crore by Q2FY26, with the Net Debt/EBITDA ratio now down to 0.7x, illustrating disciplined capital allocation and improved financial health. Enhanced EBITDA generation, coupled with reduction in leverage, positions Apollo Tyres to pursue growth opportunities while delivering superior returns on employed capital. Debt reduction continues to be a central theme, with FY27E total debt expected at Rs 1,877 crore.

Management Guidance: Volume Momentum and Margin Focus

The company remains focused on sustained volume growth, strong free cash flow generation, and further improvement in return ratios. Management expects topline momentum to persist across India and Europe, with stable raw material costs and expanding margins. Strategic priorities include capacity expansion in Hungary and advancing premiumization in European markets.

Key Financial Metrics and Ratios

Forecasts indicate robust earnings momentum—PAT CAGR of 37% is projected between FY25 and FY27, and double-digit gains in operating margins and ROCE are anticipated. See the table below for key financial projections:

Balance Sheet Strength and Liquidity

Forecasts for FY27E reveal shareholders’ funds of Rs 17,255 crore, cash reserves at Rs 1,129 crore, and a quick ratio of 1.1, indicating robust solvency and liquidity. The company’s capital structure, resilient reserves, and tightly controlled capex deliver steady growth in net current assets and a sound foundation for future expansion.

Recent Events and Key Risks

While the company faces risks such as margin pressure from low operating leverage and export uncertainty in a volatile global trade environment, domestic operations showed resilient volume growth and a double-digit rebound in exports. Strategic actions, including European restructuring, align with long-term growth plans and the need for a streamlined international footprint.

Shareholding Pattern and Market Position

Promoters maintain a consistent 37% stake as of September 2025, with DIIs and FIIs owning 27.9% and 11.9% respectively, highlighting strong institutional confidence in Apollo Tyres . The market cap stands at Rs 33,022 crore, and the stock’s 52-week high/low of Rs 557/368 presents ample upside to the stated target, supported by solid financials and risk management.

Outlook and Investor Strategy: Levels & Targets

The recommended BUY level is around Rs 520, and target for investors is Rs 605 over the next 12 months. Key support levels can be found at Rs 470, with resistance near Rs 600–605. Investors should monitor margin trends, debt reduction milestones, and European expansion progress for incremental gains. Apollo Tyres stands out as a high-conviction auto component play, leveraging favorable macro conditions, management focus, and resilient sector positioning.