Surging crude prices have triggered concerns for a host of manufacturing companies. The tyre industry is one such example. The share price of Apollo Tyres has seen a sharp 5% correction in 5 days. However, Emkay Global has maintained a ‘Buy’ rating on Apollo Tyres and set a set a a target price of Rs 600. This implies over 36% upside potential for the stock from current levels. The brokerage house is betting on a robust demand outlook, strong pricing power, capacity expansion, and many other factors behind retaining the rating.
Robust demand outlook
The company is seeing strong demand with double-digit year-on-year growth across all segments and channels in Q4FY26. This momentum, driven by government infrastructure spending, economic development, and recent GST cuts, is expected to remain healthy through FY27.
“Current outlook for FY27 also appears to be healthy. Apollo Tyres has announced a capacity addition of Rs 5,800 crore (for TBR and PCR); these will come onstream by the end of FY28 and FY29 (normal 2-3-year gestation period),” said the report.
Strategic margin targets and pricing power
The management is maintaining a steady-state standalone margin target of 14-15% despite an expected increase in raw material costs. They are achieving this through disciplined pricing, having already implemented price hikes in January 2026, and a focus on a better product mix and lower discounting.
“Raw material prices are expected to be flattish QoQ in Q4FY26, with 3% rise expected in Q1FY27. Tight demand–supply dynamics should support tyre makers’ pricing power. Apollo Tyres has already taken certain price hikes in January,” said Emkay Global.
Other tyre companies have undertaken price hikes too. In fact, over the past few quarters, the tyre industry refrained from price cuts despite softer raw material prices, reflecting improved pricing discipline and a sharper profitability focus.
Significant capacity expansion
Apollo Tyres has announced a Rs 5,800 crore investment to expand its Truck and Bus Radial (TBR) and Passenger Car Radial (PCR) capacities. While these new capacities are expected to come onstream by the end of FY28 or FY29, the company plans to meet FY27 demand through smaller capacity additions in India and Hungary, supplemented by increased outsourcing.
European restructuring for profitability
The company is undergoing a major restructuring in Europe, including the closure of its Netherlands plant and shifting production to Hungary and India. This move is projected to lift European margins by 200-300 basis points by FY28 by significantly reducing conversion costs.
Apollo Tyre share price performance
The share price of Apollo Tyres has fallen 5.7% in the past five trading sessions. The stock has declined 14.4% in the last one month and 10% in the past six months. However, Apollo Tyres’ stock price has given a return of 11.6% over the previous one year.