MRF vs Apollo Tyres are the two tyre giants in India. In this article, we will fundamentally analysis both companies and look into their businesses. Read this article to learn about the two biggest competitors.
Company Overview
MRF Tyre is an Indian tyre manufacturer, headquartered in Chennai, India. MRF started its journey as a toy balloon manufacturing unit in a shed in Madras in 1946, and after 5 years in 1952, it ventured into the manufacturing of tread rubber.
It manufactures a wide range of tyres for two-wheelers, passenger cars, trucks, pickups, LCVs, three-wheelers, farms, etc. MRF is also involved in producing tubes, flaps, tread rubber, speciality chemicals, and trading in rubber chemicals.
The company caters to people all over India and more than 60 countries across the globe. It has 10 manufacturing units and 192 offices. Institutional customers include original equipment manufacturers, state transport undertakings, defence, the government, departments, contractors, and retail markets.
Brand Finance rated MRF as the second strongest tyre brand in the world, besides rating MRF the most valued Indian tyre brand
Apollo Tyres, headquartered in Gurgaon, India, is an international tyre manufacturer and ranks among the 20 top tyre makers. The company markets its products under its two global brands, Apollo and Vredestein.
The product portfolio of the company includes the entire range of passenger cars, SUVs, MUVs, light trucks, truck-buses, two-wheelers, agriculture, industrial, speciality, bicycle and off-the-road tyres, and retreading material and tyres. It caters to 100+ countries with 181 offices and six manufacturing units—four in India and one in the Netherlands and Hungary.
Segment Analysis
MRF is engaged in a single primary segment. The revenue breakup contribution is 91% from automobile tyres, 6% from automobile tubes, 2% from speciality chemicals, and 1% from others. The geographical revenue breakdown is 92% from India & 8% from outside India.
Apollo Tyre operations comprise only one business segment: automobile tires, automobile tubes, and automobile flaps. In the context of the geographical segment, 68% is contributed by APMEA (Asia Pacific, Middle East, and Africa), 28% from Europe, and 4% from others.
Industry Overview
India has been the fastest-growing major economy in the last few years. During the year, India became the 5th largest economy in the world. The RBI, in its March 2023 projection, estimated India’s GDP to grow at 7% in FY 2023.
Growth in the vehicle industry and replacement demand enabled the tyre business to record healthy growth in FY23. However, given the global market recession, export performance was low. Higher volumes and price increases implemented by the industry preserved profits. Higher capital spending by the auto sector indicates high levels of capacity utilization and, as a result, higher levels of production in the future.
According to a report by the Automotive Tyre Manufacturers Association (ATMA), the tyre industry expects to generate an incremental turnover of Rs 25,000 crores in the next three years and cross the Rs 1 lakh crore mark, owing to past capacity addition and the country’s globally aligned regulatory environment.
The total turnover of the domestic tyre sector is currently Rs. 75,000 crore. In the previous three years, the industry has invested Rs. 35,000 crore in new capacity boosts across all important tyre categories.
The tyre demand in India is expected to grow stronger given the rebounding economic activities and the big push by the government of India for infrastructure growth in the nation.
MRF vs Apollo Tyres – Financials
Revenue & Net Profit
MRF reported revenue of Rs. 23009 crore in FY23 against Rs. 19317 crore in FY22, indicating an increase of 19%. While, Apollo Tyres reported revenue of Rs. 24568 crore in FY23 against Rs. 20948 crore in FY22, indicating an increase of 17%. On a 4-year CAGR basis MRF has grown at a higher growth rate compared to Apollo Tyres in terms of revenue.
The figures below compare the revenue of MRF vs Apollo Tyres over the last five fiscal years.
| Financial Year/ Particulars | Revenue from operations (In Cr.) | |
|---|---|---|
| MRF | Apollo Tyres | |
| 2023 | 23008.5 | 24568.13 |
| 2022 | 19316.72 | 20947.58 |
| 2021 | 16163.19 | 17397 |
| 2020 | 16239.36 | 16350.2 |
| 2019 | 16062.46 | 17548.84 |
| 4-Year CAGR | 9.40% | 8.78% |
MRF’s profitability has increased to Rs. 769 crore in FY23 from Rs. 669 crore, indicating an increase of 15%. The profits decreased significantly after 2021 due to a sharp increase in raw material costs in FY22.
Apollo Tyres profitability has increased to Rs. 1105 crore in FY23 from Rs. 639 crore, indicating an increase of 73%. The significant increase in profits was due to lower expenses and a change in product mix to increase the share of speciality, which has a higher net profit margin. In terms of profit, MRF has given negative returns.
The figures below compare the profits of MRF vs Apollo Tyres over the last five fiscal years.
| Financial Year/ Particulars | PAT (In Cr.) | |
|---|---|---|
| MRF | Apollo Tyres | |
| 2023 | 768.96 | 1104.64 |
| 2022 | 669.24 | 638.6 |
| 2021 | 1277.07 | 350.21 |
| 2020 | 1422.57 | 476.39 |
| 2019 | 1130.61 | 679.84 |
| 4-Year CAGR | -9.19% | 12.91% |
Profit Margins
The operating margins of MRF and Apollo Tyres stand around 10.42% and 13.57%, respectively, with Apollo taking the lead. However, the 5-year average for both companies is approximately equal.
The margins for both companies have been reduced in FY22, mainly due to a rise in the cost of raw materials and the companies’ inability to pass the cost escalations due to high competition and market dynamics.
The figures below compare the operating profit margins of MRF vs Apollo Tyres over the last five fiscal years.
| Financial Year/ Particulars | Operting Profit Margin | |
|---|---|---|
| MRF | Apollo Tyres | |
| 2023 | 10.42% | 13.57% |
| 2022 | 10.66% | 12.39% |
| 2021 | 18.25% | 16.20% |
| 2020 | 14.67% | 11.98% |
| 2019 | 14.40% | 11.26% |
| 5-year Average | 13.69% | 13.08% |
The net profit margins of MRF and Apollo stand at around 3.34% and 4.5%, respectively, with Apollo being ahead again. However, looking at the 5-year average, we find MRF significantly ahead of Apollo.
The margins for both companies have been reduced in FY22, mainly due to a rise in the cost of raw materials and the companies’ inability to pass the cost escalations due to high competition and market dynamics.
The figures below compare the net profit margins of MRF vs Apollo Tyres over the last five fiscal years.
| Financial Year/ Particulars | Net Profit Margin | |
|---|---|---|
| MRF | Apollo Tyres | |
| 2023 | 3.34% | 4.50% |
| 2022 | 3.46% | 3.05% |
| 2021 | 7.90% | 2.01% |
| 2020 | 8.76% | 2.91% |
| 2019 | 7.04% | 3.87% |
| 5-year Average | 6.10% | 3.27% |
Return Ratios
MRF reported a return on equity of 5.35%, lower than its 5-year average of 8.71%. Apollo Tyres reported a return on equity of 8.97%, compared to its 5-year average of 5.88%.
The figures below compare the return on equity of MRF vs Apollo Tyres over the last five fiscal years.
| Financial Year/ Particulars | Return on Equity | |
|---|---|---|
| MRF | Apollo Tyres | |
| 2023 | 5.35% | 8.97% |
| 2022 | 4.88% | 5.51% |
| 2021 | 9.97% | 3.28% |
| 2020 | 12.34% | 4.77% |
| 2019 | 10.99% | 6.86% |
| 5-year Average | 8.71% | 5.88% |
Considering the return on capital employed, MRF and Apollo Tyres reported 8.22% and 10.87%, respectively. MRF returns are again lower than its 5-year average of 11.42%, while Apollo beat its 5-year average of 7.36%.
The return ratios decreased due to a decrease in profitability and are improving slowly.
The figures below compare the return on capital employed by MRF vs Apollo Tyres over the last five fiscal years.
| Financial Year/ Particulars | Return on Capital Employed | |
|---|---|---|
| MRF | Apollo Tyres | |
| 2023 | 8.22% | 10.87% |
| 2022 | 7.26% | 7.34% |
| 2021 | 13.70% | 5.93% |
| 2020 | 12.66% | 5.30% |
| 2019 | 15.26% | 7.35% |
| 5-year Average | 11.42% | 7.36% |
Leverage Ratios
The debt-to-equity ratio of both companies during the last 5 years indicates a positive signal. Both companies have relied little on borrowed capital. The 5-year average debt to equity of MRF & Apollo Tyres stands at 0.16 & 0.43, respectively, which means they can retain more of their revenue as they do not have a huge obligation towards the repayment of debt and the interest on it.
The figures below compare the debt-equity ratio of MRF vs Apollo Tyres over the last five fiscal years.
| Financial Year/ Particulars | Debt to Equity | |
|---|---|---|
| MRF | Apollo Tyres | |
| 2019 | 0.23 | 0.51 |
| 2020 | 0.15 | 0.68 |
| 2021 | 0.15 | 0.56 |
| 2022 | 0.2 | 0.53 |
| 2023 | 0.16 | 0.43 |
| 5-year Average | 0.18 | 0.54 |
When it comes to interest coverage ratio, MRF leads with an ICR of 4.28x, while Apollo’s figure comes up to 3.59x. ICR above 1.5x is an acceptable ratio, according to which both companies are considered safe.
The figures below compare the ICR of MRF vs Apollo Tyres over the last five fiscal years.
| Financial Year/ Particulars | Interest Coverage Ratio | |
|---|---|---|
| MRF | Apollo Tyres | |
| 2019 | 7.04 | 5.47 |
| 2020 | 5.77 | 2.81 |
| 2021 | 7.17 | 2.21 |
| 2022 | 4.45 | 2.82 |
| 2023 | 4.28 | 3.59 |
| 5-year Average | 5.74 | 3.38 |
MRF vs Apollo Tyres – Key Metrics
| Particulars | MRF | Apollo Tyres |
|---|---|---|
| CMP | ₹ 1,43,181 | ₹ 550.8 |
| Market Cap(Cr) | ₹ 55,823 | ₹ 29,744 |
| EPS | 3986.92 | 25.05 |
| Stock P/E | 29.45 | 18.18 |
| P/B | 3.15 | 2.23 |
| Promoter Holdings | 27.75% | 37.34% |
| FII Holdings | 19.58% | 22.02% |
| Dividend Yield | 0.21% | 1.41% |
Future Outlook
MRF
- It targets decarbonizing its operations and reaching Net Zero emissions by 2070
- Strengthening the market portfolio with new products both in the motorcycle and scooter segments.
Apollo Tyres
It targets becoming the first Indian tyre manufacturer to be a carbon-neutral tyre company by 2050.
- Expand market share by introducing new products across segments.
- To source 30% of total power usage from renewable sources by FY26.
Conclusion
As we conclude the article on the comparison between MRF & Apollo Tyres, we have understood their business, financials, and future outlook. Both are major players in the tyre industry, with almost similar financials.
Further analysis is required to understand the risk & return characteristics and suitability before investing. Do comment your thoughts in the section below.
