Buy APL Apollo Tubes; target of Rs 1340: Motilal Oswal

Motilal Oswal's research report on APL Apollo Tubes

APAT reported a weak operating performance, with an 18%/26% YoY decline in gross profit/EBITDA per MT in 2QFY23. Margin was adversely impacted by an adverse sales mix (8pp YoY decline in VAP mix), channel destocking, and higher cost of the Raipur plant. We retain our FY23E/FY24 earnings estimate on the back of a higher margin, with an increasing share of VAP and a ramp up of Raipur plant. We maintain our Buy rating.

Outlook

We largely maintain our earnings estimates for FY23/FY24 on the back of a higher margin, with an increasing share of VAP and a ramp up at the Raipur plant. We maintain our Buy rating and value the stock at 33x Sep’24E EPS to arrive at our TP of INR1,340.