Apollo Tyres shares jump 6% on stellar Q2 earnings. Where is the stock headed?

Apollo Tyres share price rallied over 6% in intra-day trade on Wednesday after the tyre manufacturer posted a 2.5 times rise in consolidated net profit at ₹474 crore for the July-September quarter, riding on higher revenue and lower raw material costs. At around 1 pm, the Apollo Tyres stock price was trading at ₹408.70, up 6.40% on the NSE.

The tyre stock has delivered returns of 38.20% and 148% in one year and three years, respectively. Shares of Apollo Tyres have risen 25% so far this year, as against a 28% gain in the Nifty midcap 100 index.

The tyre maker's revenue from operations rose to ₹6,279.67 crore during the period. The company said that its cost of materials consumed was lower at ₹2,634.92 crore in the September quarter of the current financial year, compared to ₹3,101.56 crore in the same quarter last year.

Operating profit, calculated as EBITDA, climbed 63% YoY to ₹1,159.8 crore, while margins stood at 18.5%.

"Our operations have experienced positive revenue growth, and we are witnessing encouraging signs, particularly from India, indicating further demand improvement in the future," said Apollo Tyres chairman Onkar Kanwar.

"We remain steadfast in our commitment to achieving profitable growth, aligned with our long-term vision," Kanwar added.

Analysts at global brokerage firm Morgan Stanely have maintained an 'equal-weight' rating on the Apollo Tyres stock with a target price of ₹398 per share. This indicates a downside potential of 2.6% from the current market levels.

Data from Trendlyne shows an average target price of ₹419 on Apollo Tyres, suggesting a potential upside of 3% from the current market prices. The consensus recommendation from 27 analysts for the counter is a 'hold'.

In terms of technicals, the relative strength index RSI (14) of the counter stands at 52.4, indicating it is neither overbought nor in an oversold zone. The stock has a one-year beta of 0.8, indicating very low volatility, the Trendlyne data showed.

Shares of Apollo Tyres are also trading higher than the 5-day, 20-day, 50-day, 100-day, 150-day, and 200-day simple moving averages (SMAs).