APL Apollo Tubes Limited has informed the Exchange regarding a revised press release dated September 13, 2021, titled "Patent Office grants registrations to 6 innovative products of APL Apollo Tubes Limited".
We expect it continue to trade at such premium multiple and initiate coverage on APL with a BUY rating at a TP of INR2,226/share (35x FY24E EPS). APL Apollo Tubes (APL) is Indias leading structural steel tube manufacturer with a capacity of 2.6 million tonne per annum (mtpa) and a pan-India presence. APLs market share enhanced from 27% in FY16 to 50% in FY21, led by a strong distribution network, branding, offering of customized & innovative products and capacity enhancement. APLs strategy to focus on rural areas and tier 2/3 cities paid off well during the reverse migration last year. With 24% CAGR in both revenue and PAT over FY11-21, it has emerged as one of the pioneers in the segment, much ahead of competitors. Going ahead, we expect APL to post revenue/PAT CAGRs of 20%/34% over FY21-24E, led by an increased mix of value-added products (75% in FY25 vs 57% in FY21), capacity expansion, improved margins, and enhanced government spending on infra. APLs valuation has sharply rerated on market share gains, debt reduction, robust growth visibility, and margin expansion. It is trading close to the average multiple of building material stocks as 75% of its product mix caters to this segment.