APL Apollo Tubes Ltd. share price target

APL Apollo is India's largest producer of electric resistance welded (ERW) steel pipes. Over the years, through organic and inorganic initiatives, the company enhanced its ERW capacity, which is currently ~2.5x its nearest peer. APL Apollo has an ERW capacity of 2.3 million tonne (MT) (inclusive of recently acquired 200000 tonnes capacity from Shankara Building Products), which has increased more than 8x in the last nine years. In the current decade itself, APL Apollo has witnessed notable growth in its capacity/volume thereby increasing its market share. APL Apollo's installed...

APAT reported a strong volume growth of 29% YoY on consolidated basis for Q1FY20. This is the second consecutive quarter of healthy volume growth as was reported in Q4FY19 (39% YoY growth).

Refer to important disclosures at the end of this report A rejuvenated 2019; reiterate Buy APAT has announced the acquisition of a 200k ton plant in Hyderabad from Shankara Building Products for Rs700mn after a solid 4Q sales volume growth (+39% yoy). APAT's total capacity is now 2.3mn tons, which is 28% of the Indian steel pipe industry. Key benefits from this plant are: high-margin products of 155k tons, reduction in logistics costs for Andhra Pradesh market and 29acres of land area (viable for future expansion). To add, Shankara will buy 250k tons of pipes from APAT annually....

EBITDA margin expanded 20bps qoq to 11.2% (Emkay est: 11.4%; consensus est: 11.3%). EBIT margin expansion was constrained to 50bps qoq, despite a 600bps improvement in Europe margin, due to a 50bps contraction in APMEA margin. We expect...

Consolidated Revenues of Rs. 1,690 Cr. (26%/1% YoY/QoQ) where reported volumes growth came in at 7.4% YoY at 304kTPA. Reported volumes of 304kt (excluding trading & scrap) in Q2FY19 were impacted by heavy monsoon, Kerala floods and transporters strike.

APL Apollo tubes (APT) reported its Q2FY19 numbers which came in below our expectations. Net revenue grew at a healthy pace of 25.7% YoY on the back of 14-15% increase in realizations and a muted volume growth of 7% YoY. The operating profit disappointed registering a degrowth of 8.7% YoY due to lower share of high margin products. Poor operational performance, lower other income and higher interest cost impacted profitability as net profit declined 34.4% YoY.

Consolidated Revenues of Rs. 1,676 Cr. (45%/10% YoY/QoQ) were driven by a healthy 14% volume growth and sharp 28% rise in realization across products aided by higher HRC prices.

APL Apollo Tubes (APT) reported strong set of numbers in Q1FY19 led by robust growth in volumes. Net revenue for the quarter grew by 45.1% yoy on the back of 14% volume growth and ~28% increase in realizations. However, net profit growth was restricted to 21% due to subpar operational performance, lower other income and higher interest cost.

APL Apollo Tubes (APT) reported mixed set of numbers in Q4FY18 which were marginally lower than our estimates. Sales volume during the quarter grew at a strong 28% which boosted total income growth to 40.4%. However, PAT de-grew by 10.9% yoy mainly on account of lower margins and higher tax for the company.