Decline in raw material costs by 3.5% drives Apollo Tyres' margins

Weak demand, high competition could weigh on stock in near term

Apollo Tyres recorded a better-than-expected performance in the December quarter (Q3), notwithstanding pressure on the demand front. The gains came in largely on the operational front, with margins being aided by a fall in raw material costs. 

The company posted an operating profit margin of 12.1 per cent, which was 80-120 basis points (bps) higher than what the Street had estimated. It indicated that raw material costs fell 3.5 per cent in the quarter — a trend expected to continue this quarter. 

While natural rubber prices have been steady, a fall in crude oil prices should help bring down raw material costs