APL Apollo Tubes Ltd. share price target

APL Apollo reported steady Q3FY18 result, as Net revenue increased 39.3%, while Net profit was up 23.4% yoy. Higher sales volume boosted total income; however rise in material cost impacted operational margins. We remain positive on the business given its healthy gains across exports and OEMs segments, which we expect to continue.

APL Apollo Tubes (APAT) in 2QFY18 posted consolidated revenues of Rs. 1345 Cr. (up 45% Y-o-Y, 16% Q-o-Q) due to strong 20% volume growth and higher realizations reported in Q2FY18. Strong Volume performance was supported by new clients in OEMs (grew 107% Y-o-Y)

The next generation DFT was one of the most favourite topic. DFT has enabled APAT to offer customized products at a lower cost and in less time than its competitors. It has also given access to overseas markets including US, Europe and Middle East. APAT expects to make 8-10% better margins using this technology. Investors also discussed 2QFY18 results which were in line with expectations. APAT reported impressive sales volume growth of 18% and earnings growth of 21% YoY despite GST implementation headwinds. The management highlighted that most of its 400 products are specialized and are used...

Valuation: At a CMP of Rs. 1,912.1, the company's share is trading at TTM P/E multiple of 31.5x. Moreover, it is trading at a P/BVPS and EV/EBITDA multiple of 6.3x and 16.2x, respectively. Anticipating higher acceptance of the DFT products and the volume growth guided by the management, we have increased the EV/EBITDA valuation multiple from 7.8x to 8.5x. Applying the same to FY20E EBITDA, we arrive at a target price of Rs. 1,850.4 per share. Thus...

Largest manufacturer of ERW Pipes, revenue growth aided by strong Volumes and capacity expansion. Total Industry size in value /volume terms for ERW Pipes is Rs. 32,500 Cr./ 8MTPA resp. APL Apollo Tubes to have a total installed capacity 2.0MTPA by FY18 end. Indian ERW market growing @ 9-10% p.a.

APL Apollo Tubes is amongst India's leading branded steel products manufacturers. The Company operates seven manufacturing facilities with a total capacity of 1.3 Million MTPA. It has pan India presence with units strategically located in Sikandarabad (3 units), Bangalore, Hosur, Murbad and Raipur. APL Apollo's multi-product offerings include over 400 varieties of MS Black pipes, Galvanized Tubes, Pre-Galvanized Tubes, etc.

We initiate with buy for a price target of Rs 2647.6 (12xFY20 EV/EBIDTA ) representing an upside potential of 73.6% from the CMP of Rs 1525 over the next 27 months.

We recently met the management of APL Apollo Tubes (APL) to understand its business model and long term prospects. APL is one of the leading ERW steel tubes manufacturers in India. The product range of the company comprises four major types of pipes/tubes, viz. hollow section pipes, round pipes (black), pre-galvanised tubes (GP) and galvanised tubes (GI). In terms of product-wise revenue break-up, for 9MFY17, hollow section pipes contributed 46.1% to the topline while pregalvanised (GP), round pipes (black), galvanised tubes (GI) and others (trading & scrap) contributed 22.6%, 14.7%,14.1% and 2.5% of the...

APL Apollo Tubes Ltd. (APL) is one of the leading manufacturers of ERW pipes in India with a manufacturing capacity of 1.3mn tonnes. Its nearest competitor is nearly half the size of it. Out of the 1.3mn tonnes, galvanized (GI) and pregalvanized (GP) pipe capacity is 0.12mn tonnes and 0.2mn tonnes, respectively. ERW pipes and structures find application across various industries such as a...

APL Apollo is the fastest growing steel tube manufacturer in India, and has attained pole position in this category. The company is headquartered in Delhi NCR, and has six...