MRF VS Apollo Tires – Financials, Future Plans & More

MRF vs Apollo Tires These are the two tire giants of India. In this article, we will fundamentally analyze both companies and look at their businesses. Read this article to learn about the two biggest competitors.

MRF VS Apollo Tires

Company Overview

MRF tires It is an Indian tire manufacturer based in Chennai, India. MRF started operations as a toy balloon manufacturing unit in a warehouse in Madras in 1946 and ventured into tread rubber manufacturing five years later in 1952.

We manufacture a variety of tires for two-wheelers, passenger cars, trucks, pickup trucks, LCVs, three-wheelers, and farms. MRF is also involved in the production of tubes, flaps, tread rubber, specialty chemicals and trading of rubber chemicals. .

The company serves people across India and over 60 countries around the world. It has 10 manufacturing units and 192 offices. Institutional customers include original equipment manufacturers, state transportation companies, the Department of Defense, governments, departments, contractors and the retail market.

Brand Finance ranks MRF as the second strongest tire brand in the world and ranks MRF as the most valuable tire brand in India.

apollo tires, headquartered in Gurgaon, India, is an international tire manufacturer and ranks among the top 20 tire manufacturers. The company sells its products under two global brands: Apollo and Vredestein.

The company’s product portfolio includes a complete range of passenger cars, SUVs, MUVs, light trucks, truck-buses, two-wheelers, agricultural, industrial, specialty, bicycle and off-road tires, retread materials and tires. We serve more than 100 countries through 181 offices and 6 manufacturing units (4 in India, 1 in the Netherlands and Hungary).

segment analysis

MRFs participate in a single primary segment. The sales proportion is 91% from automobile tires, 6% from automobile tubes, 2% from specialty chemicals, and 1% from other products. Revenue mix by region is 92% from India and 8% from outside India.

The Apollo Tire business consists of only one business segment: Automotive Tires, Automotive Tubes and Automotive Flaps. In the context of geographical segments, Asia Pacific, Middle East and Africa (APMEA) accounts for 68%, Europe 28% and Others 4%.

Industry Overview

India has been the fastest growing major economy over the past few years. This year, India became the world’s fifth largest economy. In its March 2023 outlook, the RBI estimated India’s GDP to grow by 7% in fiscal 2023.

Driven by growth in the automotive industry and replacement demand, the tire business recorded robust growth in FY23 as well. However, export performance was poor due to the global market recession. Profits were maintained by higher volumes and price increases implemented by the industry. High capital expenditure in the automotive sector means high capacity utilization and consequently higher production levels in the future.

According to a report by the Automotive Tire Manufacturers Association (ATMA), the tire industry is expected to achieve a revenue increase of Rs 25,000 crore and cross Rs 1 lakh crore in the next three years due to past production capacity increase and the country’s global growth. . Aligned regulatory environment. Currently, the total turnover of the domestic tire segment is Rs. 75 trillion won. Over the past three years, the industry has invested 500 billion won. $35 trillion in new capacity across all important tire categories.

Tire demand in India is expected to grow stronger as economic activity picks up and the Indian government pushes for infrastructure growth.

MRF vs Apollo Tires – Finance

Sales and Net Profit

MRF reported revenue of Rs. 23,009 crore in FY23 compared to Rs 1,931.7 billion in FY22, an increase of 19%. Apollo Tires, on the other hand, reported revenue of Rs. 24,568 crore in FY23 compared to Rs 20,948 crore in FY22, an increase of 17%. On a 4-year CAGR basis, MRF has grown at a higher growth rate compared to Apollo Tires in terms of revenue.

The picture below compares revenue Comparison of MRF and Apollo tires over the last 5 years.

The profitability of MRF increased to Rs. 769 crore in FY23 from Rs. It increased by 15% to 66.9 billion won. Profit has declined significantly since 2021 due to a surge in raw material costs in 2022. Apollo Tires profitability increased to Rs. 1105 crore in FY23 from Rs. It increased by 73% to 63.9 billion won. The significant increase in profits was driven by changes to our product mix to reduce costs and increase our share of specialty areas with higher net profit margins. On the profit side, MRF had negative returns.

The figures below compare the revenue of MRF and Apollo Tires over the past five years.

profit

The operating profit margins of MRF and Apollo Tires are 10.42% and 13.57%, respectively, with Apollo leading the way. However, the five-year averages for both companies are nearly identical.

Margins of both the companies declined in FY22, primarily due to rising raw material costs and the inability of the companies to pass through rising costs due to intense competition and market dynamics.

The picture below compares operating profit margin Comparison of MRF and Apollo tires over the last 5 years.

The net profit margins of MRF and Apollo are approximately 3.34% and 4.5% respectively, with Apollo leading again. However, if we look at the five-year average, we can see that MRF is well ahead of Apollo.

Margins of both the companies declined in FY22, primarily due to rising raw material costs and the inability of the companies to pass through rising costs due to intense competition and market dynamics.

The picture below compares net profit margin Comparison of MRF and Apollo tires over the last 5 years.

rate of return

MRF reported a return on equity of 5.35%, below its five-year average of 8.71%. Apollo Tires reported a return on equity of 8.97%, compared to a five-year average of 5.88%.

The picture below compares return the stake Comparison of MRF and Apollo tires over the last 5 years.

Considering return on equity, MRF and Apollo Tires recorded 8.22% and 10.87% respectively. MRF returns were again below the five-year average of 11.42%, while Apollo outperformed the five-year average of 7.36%.

The return rate has decreased due to lower profitability and is slowly improving.

The picture below compares return on capital Here is a comparison between MRF and Apollo Tires over the last 5 years.

leverage ratio

The debt ratios of both companies over the past five years are showing positive signs. Both companies relied little on borrowed capital. The five-year average debt to equity of MRF and Apollo Tires is 0.16 and 0.43, respectively. This means you can keep more of your profits because you don’t have a large obligation to repay debt and the interest on it.

The picture below compares DebCapital ratio Comparison of MRF and Apollo tires over the last 5 years.

When it comes to interest coverage ratio, MRF leads with an ICR of 4.28x, while Apollo’s figure stands at 3.59x. An ICR above 1.5x is an acceptable ratio, according to which both companies are considered safe.

The picture below compares ICR Comparison of MRF and Apollo tires over the last 5 years.

MRF vs Apollo Tires – key indicators

future prospects

MRF

• We aim to decarbonize our operations and achieve Net Zero emissions by 2070.
• We strengthen our market portfolio with new products in both the motorcycle and scooter segments.

apollo tires

• The company aims to become India’s first tire manufacturer and carbon neutral tire company by 2050.
• Expand market share by launching new products across multiple segments.
• Source 30% of total electricity usage from renewable energy sources by FY26.

conclusion

Concluding our article on MRF vs Apollo Tires comparison, we have understood their business, finances and future prospects. Both are major players in the tire industry and have roughly the same financial size. Prior to investment, additional analysis is required to determine the nature and suitability of risk and return. Please write your thoughts in the section below.

Written by Ashish Agarwal

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