Motilal Oswal's research report on APL Apollo Tubes
APAT reported robust volume growth of ~56% YoY/2% QoQ to 662KMT. The share of Value-Added Product (VAP) improved sequentially to 57% in 1QFY24 from 54% in 4QFY23, but was still below 1QFY23 levels of 61%. EBITDA/MT was marginally up by 1% YoY, despite Gross profit/MT declining 11% YoY, on the back of favorable operating leverage. While we maintain our FY24 earnings estimates, we increase our FY25 earnings estimates by 12%, based on an increase in volume estimates of ~9%. The volume growth visibility is improving due to a favorable demand outlook coupled with incremental capacity addition to meet this demand.
Outlook
We value the stock at 33x FY25E EPS to arrive at a TP of INR1,715. We reiterate our BUY rating on the stock.
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