Sharekhan has given Buy recommendation for APL Apollo Tubes with a target price of Rs. 1620 in its research report issued on Jun 03, 2021
Sharekhan’s research report on APL Apollo Tubes
Q4FY2021 operating profit/PAT at Rs. 206 crore/Rs. 119 crore, up 72%/110% y-o-y and beat of 16%/22% versus our estimate led by margin outperformance at Rs. 4,742/tonne due to high share of VAP at 60%. Management has guided for 10%-15% volume growth for FY2022 if there is no third wave of COVID-19; Margin guidance of above Rs. 5,000/tonne for existing capacity and Rs. 6,000-7,000/tonne for new products such as color pipe tubes. Target to expand capacity by 57% to 4mtpa by FY2025 with focus on VAP portfolio and confident to achieve double-digit volume growth in non-pandemic period. Tricoat merger/Raipur expansion (0.4 mtpa) to get completed by December 2021.
Outlook
We retain Buy on APL with a revised PT of Rs. 1,620, given expectation of strong 39% PAT CAGR over FY2021-FY2023E and high RoE of 29%. APL is well placed to benefit from rising share of structured steel tubes in India’s steel consumption.