APL Apollo Tubes Ltd. share price target

We retain a BUY rating on the stock with a TP of Rs 1,100/share (from Rs 1,215/share) and continue to value it at 30x PE of FY24E EPS.

They have no plans to raise funds as internal cash flow generation is strong and are planning to become debt free. Their focus is on innovating new shapes and sizes. Management continues to remain confident of maintaining revenue growth...

We retain a BUY rating on the stock with a TP of Rs 1,215/share and continue to value it at 30x PE of FY24E EPS

We visited APL Apollo Tubes’ (APL) Murbad, Maharashtra facility and met with multiple APL distributors. Murbad was Lloyds steel plant, which APL acquired in CY10 for a cash consideration of Rs400mn with a capacity of 90,000te. The same has been ramped up to 0.35mtpa over past seven years, with the introduction of direct forming technology (DFT) and cold rolling and Galva (GP/GI) capacity.

APL Apollo Tubes Q2FY22 EBITDA was slightly weaker than our forecast. EBITDA stood at Rs2,222 mn (9% below our forecast). EBITDA/t expanded by 48% YoY to Rs5,199, although sequentially it fell 24%. Nevertheless, EBITDA/t over Rs5,000 is likely to be sustainable over the coming one year in our view; APL aims to increase EBITDA/t to Rs6-7,000/tonne in coming 2-3 years as it expands its Raipur facility where it will have 0.5 mtpa of high-margin products. Also, APL targets strong volume growth of 2.5 mn...

We analyzed the shifting trends in the Structural Tube industry, driven by growing consumption of steel tubes in Construction projects, coupled with growing acceptance and increasing applications of steel tubes. Key drivers of APAT's performance include: a) growing usage of structural tubes as a replacement to RCC, b) first-mover advantage by installing DFT in India, and c) leadership position to help benefit from this shift....

We recommend a BUY with TP of Rs. 1,780/share.