Buy APL Apollo Tubes; target of Rs 1720: Sharekhan

Sharekhan is bullish on APL Apollo Tubes has recommended buy rating on the stock with a target price of Rs 1720 in its research report dated August 07, 2023.

Broker Research

August 10, 2023 / 16:42 IST

Buy

26 Aug, 2025 12:21

Volume

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Sharekhan's research report on APL Apollo Tubes

Q1 consolidated PAT of Rs. 194 crore (down 4% q-o-q) was below our estimate due to a miss in the margin, higher interest cost partially offset by higher other income and lower depreciation. Inline volume of 662kt (up 57%/2% y-o-y/q-o-q). EBITDA margin declined by 6.5% q-o-q to Rs4,645/tonne (8% below our estimate) due to inventory loss and impact of channel destocking. Adjusting for inventory loss, operating profit would have stood at Rs375-380 crore, which implies 14-16% q-o-q growth. Also, excluding (ABPL) EBITDA per tonne was at Rs5,700/tonne. Management hinted toward sustainable, strong volume/margin-led earnings growth over FY24-26. EBITDA guidance of Rs1,400-1,500 crore/Rs2,500 crore for FY24/FY25 implies 56% CAGR over FY24-25 and is higher than our EBITDA CAGR estimate of 45% over the same period. Thus, a faster Raipur ramp-up provides an upside to our earnings estimate.

Outlook

We maintain Buy on APL with a revised PT of Rs. 1,720. A strong earnings growth outlook high RoE/RoCE of 34%/42% in FY25E would narrow the valuation gap with listed peers and makes the risk-reward scenario favourable. APL trades at 27.5x its FY2025E EPS.

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