Buy APL Apollo Tubes; target of Rs 1330: Motilal Oswal

Motilal Oswal's research report on APL Apollo Tubes

APL Apollo Tubes (APAT)’s long-term growth story remains intact underpinned by growing application and rising consumption of structural steel tubes in residential & commercial buildings, warehouses, factories, agriculture and other infrastructure works. The industry, post-inventory destocking in the last quarter because of higher steel prices, is now witnessing channel re-stocking led by correction in steel prices. From our channel checks, we sense the overall demand scenario to be better with channel re-stocking happening in anticipation of a stable or marginally higher steel price. Primary steel (HRC) price declined from the all-time high level and accordingly the gap between primary and secondary steel prices narrowed. Overall margins of the company are expected to get a boost with the commissioning of Raipur plant by 3QFY23, which offers value-added products.

Outlook

We project a revenue/EBITDA/PAT CAGR of 11%/24%/32% over FY22-24, respectively. We value the stock at 34x Sep'24E EPS to arrive at our TP of INR1,330. Maintain BUY.