MarketsMOJO downgrades Apollo Tyres to 'Sell' after negative Q2 results

Apollo Tyres, a leading player in the tyre and allied industry, has recently received a 'Sell' rating from MarketsMOJO. This downgrade comes after the company reported negative results in the quarter ending June 2024. The company's PBT (profit before tax) less OI (operating income) has fallen by 29.7%, while its PAT (profit after tax) has decreased by 25.4%. Additionally, the DPR (dividend payout ratio) for the year is at its lowest at 22.13%.
Apart from these factors, there are other reasons for the 'Sell' rating. While the company has shown healthy long-term growth with an annual operating profit growth rate of 23.08%, its technical trend is currently sideways, indicating no clear price momentum. The technical trend has also deteriorated from mildly bullish to -0.86% returns since the downgrade on 24th October 2024.

However, there are some positive aspects to consider. With a ROCE (return on capital employed) of 17.1%, the stock is currently trading at an attractive valuation with a 2 enterprise value to capital employed. It is also trading at a discount compared to its average historical valuations. In the past year, the stock has generated a return of 30.44%, while its profits have increased by 33.7%. The PEG (price/earnings to growth) ratio of the company is 0.5, indicating a potential undervaluation.

It is worth noting that institutional holdings in Apollo Tyres are high at 41.68%. These investors have better capability and resources to analyze the fundamentals of companies compared to most retail investors. In fact, their stake in the company has increased by 0.52% over the previous quarter.

In conclusion, while Apollo Tyres has shown strong long-term growth, the recent negative results and technical trend indicate a potential downside in the stock. However, the company's attractive valuation and high institutional holdings may provide some support. Investors are advised to carefully consider these factors before making any investment decisions.