Buy APL Apollo Tubes; target of Rs 2603: Prabhudas Lilladher

Prabhudas Lilladher's research report on APL Apollo Tubes

APL Apollo Tubes (APAT) cons revenue de-grew 45.9% YoY to Rs 10,792m due to loss in revenue in lockdown. Volume de-grew 40% to 238,000 MT. EBITDA de-grew 43% YoY to Rs 711m due to revenue decline while EBITDAM expanded 40bps to 6.4% on back of cost rationalisation. EBITDA/ton declined 4.7% YoY to Rs 2,986 due to lower fixed cost absorption. Although Interest cost came off by 12% QoQ as net debt came down from Rs 7.8bn as on March-20 to Rs 3.5bn at end of June, PBT fell by 62% due to higher depreciation and lower other income.

Outlook

Our previous TP of Rs 1961 is achieved but we maintain BUY with revised TP of Rs 2603. We re-iterate that this stock is a potential candidate for re-rating & value it at 10.0x FY22E EBITDA v/s 8.0x previously.

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